At the conclusion of a 2-day policy meeting, the Federal Reserve Bank put an end to the 6-year program of Quantitative Easing, a move that was widely expected among analysts and economists polled. What wasn’t as readily anticipated was the Fed’s hawkish tone in the press conference which followed the policy announcement. While Janet Yellen did confirm that interest rates would remain at existing levels for “considerable time” there is new hope that the wording of the Fed’s announcement suggests tightening, in the form of an interest rate hike, perhaps late next year.
As reported at 10:36 a.m. (GMT) in London, the U.S. Dollar Index surged to 86.4 .DXY, a gain of 0.5% while the USD/JPY gained nearly 0.33% to trade above the 109 Yen level. The EUR/USD pair dipped by 0.5% to trade at $1.2575.
U.S. Labor Market in View
The Fed also specifically failed to mention that there was “significant” slack in the labor markets as they had said in previous policy statements. While initially that helped to provide a boost to equity markets in Asia, given the global growth slowdown in Asia and the Eurozone, some wonder whether the Fed’s statement might be premature and are looking already to next week’s release of U.S. non-farms payrolls for a clearer picture of the U.S. labor market.