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EUR/USD and USD/JPY: How “dovish Fed tightening” impacts
After months of “will they / won’t they”, the Fed will finally announce the start of tapering at today’s meeting. A reduction of $15bn per month with net buying ending by the middle of next year is discounted. The focus will be on the inflation narrative and how the FOMC deals with “transitory factors” in its statement. (Remember there are no new projections or dot plots this month.) If policymakers stick to their dovish bias with conerns about upsetting bond markets, the dollar will dip. Questions will be raised about rate lift off. Does tapering not result in polciy tightening soon after? Markets have ... (full story)