The US central bank held policy firm yesterday, maintaining all existing parameters. The accompanying written statement was virtually identical to the one published in the previous announcement. There was no mention of tapering the quantitative easing program. Essentially, the Fed is content leaving policy as is, regardless of the vast improvements, and this likely remains the case through 2021.
When Jay Powell was questioned around the prospect of reducing QE, the central banker confirmed he and his team are ‘…not even thinking about thinking about tapering asset purchases’. Yes – you read correctly – they are not even thinking about even beginning to consider the prospect of tightening policy. This sent the greenback lower with EURUSD jumping above $1.21 and cable (GBPUSD) gunning for the $1.40 mark. No surprises, stock markets moved higher with the S&P (broadest US equity index) hitting 4,200 – a fresh all-time high. For context, 13 months ago the index bottomed at around 2,150. It’s now almost doubled with the US economy re-opening and 8.5 million fewer jobs than pre-pandemic. These moves may continue for the remainder of this week as markets digest the development.
On the economic calendar today, German unemployment numbers, US Q1 2021 preliminary GDP as well as US weekly jobless claims and pending home sales.
Written by Viv Savani. 6:48am, April 29th 2021
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