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US Dollar Gains Subdued Despite Likely Fed Taper in Coming Months

US Dollar Gains Subdued Despite Likely Fed Taper in Coming Months

Benjamin Spier, Technical Strategist

Talking Points:

  • FOMC minutes say Fed will likely taper in coming months
  • FOMC saw expanding economy and improved labor market
  • AUD/USD declines to a 3-day low

Want to trade with proprietary strategies developed by FXCM? Find out how here.

The Fed will likely taper quantitative easing in the coming months on better data, according to the minutes from the October FOMC meeting. The official talk of taper sent the US Dollar higher against risk-correlated currencies in the minutes following the release.

The FOMC saw the economy continuing to expand at a moderate pace and further improvements in the labor market, according to the minutes. The FOMC minutes also complained of fiscal policy restraining economic growth, but added that the impact of the government shutdown was temporary and limited. The minutes added that consumer sentiment remains unusually low.

The minutes did not conclusively determine whether or not the Fed will taper in the upcoming December meeting. Earlier today, voting FOMC member Bullard said that taper is on the table for December and it may depend on November employment data. The US Dollar rose on Bullard’s comments, and that rally may have taken the place of some of the gains that would have followed these FOMC minutes. Bloomberg reported today that 5% of polled subscribers think the Fed will taper in December.

The US Dollar took bigger gains against the Australian Dollar than other major currencies, setting a new 3-day low at 0.9331 after the release, which makes sense because a taper of Fed asset purchases is risk negative. AUD/USD may see support by a two month low at 0.9268.

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AUD/USD 1-Minute: November 20, 2013

US_Dollar_Gains_Subdued_Despite_Likely_Fed_Taper_in_Coming_Months_body_Picture_1.png, US Dollar Gains Subdued Despite Likely Fed Taper in Coming Months

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to instructor@dailyfx.com .

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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