After all the hype, the Federal Reserve shocked markets by taking a decision not to taper. Analysts were expecting a USD 10 billion reduction of its monthly asset purchases.
In fact, Saxo Bank?s John Hardy says ?it?s one of the biggest surprises he has seen in many years?. He adds that other central banks will see this approach as a ?very provocative policy?, which will re-engage the so-called currency war.
John also warns that we may not even see a taper under Fed Chairman Ben Bernanke, and this will only happen if we get ?good US economic data?.
Speaking about the Dollar, which dropped to a seven-month low after the announcement, he says the cross he is really keeping an eye on is the USDJPY, and explains it will be hard for any central bank to be as dovish as the Bank of Japan.
In addition to the taper announcement, the US central bank cut its growth forecasts for 2013 and 2014, citing strains in the economy from tight fiscal policy and higher mortgage rates.
Read more about john Hardy?s predictions here:
http://www.tradingfloor.com/posts/fed-tapering-means-weaker-usd-2111053670