Forex: The Fed Taper Proves Dollar Bullish, Eventually Risk Bearish
• The Federal Reserve surprised most market participants with a $10 bln Taper and warning of further moves
• With the central bank turning a corner on its ever-expanding stimulus program, the dollar rallied
• Risk trends (like S&P 500) didn't drop though as the liquidity drain curbs volatility...but it will
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The Fed surprised many with a Taper to end the year. We were met with a swell in price volatility and an eventual dollar rally - as expected. Yet, many were perplexed to also see a significant rally for the S&P 500 and generally robust position on risk trends. Is the Fed's support simply not important to driving markets higher anymore? Did the upgraded growth forecasts handily replace optimism amongst investors? Or perhaps this jump in risk is simply a side effect of seasonal fade in liquidity. We discuss this important event, the implications for dollar and risk trends, as well as the trade options in today's Trading Video.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.