Start of tapering = start of USD rally of 2014 The FOMC decided to begin tapering off its bond purchases at yesterday’s meeting, as we had expected. The Committee cut both its Treasury and mortgage-backed securities purchases by $5bn each, bringing its monthly purchases down to $75bn. They…

USD lower as data backs up Yellen The dollar was broadly lower Monday morning against both G10 and EM currencies after Friday’s weak US data corroborated Fed Chairman Designate Janet Yellen’s emphasis on the need for Fed policy to remain accommodative. The Empire State manufacturing…

FOMC likely to remain on hold The dollar continued to recover overnight, gaining against most G10 currencies. It rose the most against JPY and CHF while gold was the biggest loser, indicating that the perceived need for safe haven assets is diminishing. Once again the market ignored weak US…

Risk measures for the US have declined and the dollar is stronger against most currencies at the European opening Monday. US investors were apparently encouraged on Friday that the House voted to give back pay to US government workers who are furloughed by the government shut-down; that will…

The dollar fell slightly against most of the G10 currencies during the European morning with EUR and CHF being the biggest winners. EUR/USD added to its morning gains after the much-better-than-expected Italian consumer confidence in September (101.1 vs 98.5 exp.), breaking once again above…

Higher yields supporting USD: The dollar regained ground throughout much of the day Friday, closing slightly positive against most currencies as US yields moved higher. 10-year Treasury yields rose 6 bps on Friday and continued gaining today, rising 3 bps during Asian trading Monday morning….

Why is the dollar falling? There are several reasons. The most immediate reason is probably that the Fed has managed to convince the world that tapering off QE has nothing to do with tightening interest rates. That has caused expectations for US interest rates to fall back sharply. For…

BoE and ECB move forward: Yesterday’s Bank of England (BoE) and European Central Bank (ECB) meetings came to similar conclusions: they left policy unchanged while introducing “forward guidance.”…

Mean Reversion: Yesterday was yet another day of reversing the trends of the previous day. The fear that the lower-than-expected ISM figure created on Tuesday faded and USD managed to recover against most currencies, led by USD/JPY. That was despite a fall in US equities….

Reverse divergence: The picture in recent months has been one of European weakness and US strength, but that divergence was reversed yesterday when the final purchasing managers indices (PMIs) for Europe were revised upwards (although still showing contraction) while the Institute of Supply…