Daily Forex Brief 10th August

Daily Forex Brief London: Wednesday 10th August 2011

US Fed chooses the soft option From one angle, it was a big change, pledging to keep rates low for two years, rather than the previous pledge which translated to around three months. But for markets, it was not a big leap, given that interest rate markets were not far off pricing steady rates for the coming two years anyway. The Fed's language on the economy has changed substantially. It now acknowledges that "economic growth so far this year has been considerably lower than the committee had expected". Furthermore, it has changed its outlook, from expecting the pace of recovery to pick up over coming quarter, to expecting "a somewhat slower pace of recovery over coming quarters" than it did at the time of the previous meeting. By using words over actions, the Fed has chosen to keep some of its limited arsenal in reserve. The Fed, more than any other central bank, is running low on policy options and the reaction on stocks especially reflects the fact that markets are starting to sense that.

Also in today's Daily Forex Brief: Market verdict eventually positive on the Fed decision Bank of England presents outdated inflation report China trade data surges ahead once again SNB and BOJ left high and dry