The Fed meeting overnight has seen more selling in the greenback this morning as their statement signalled that a slightly more hawkish message was largely priced in. The reaction of markets the morning after a major risk event is often telling. So, the fact that the greenback is still offered perhaps points to a more restrained Fed going forward.

FOMC wait-and-see mode remains

Chair Powell and his fellow policymakers acknowledged that economic activity indicators have continued to strengthen and the economy has made progress towards its goals of price stability and maximum employment. But especially on employment, there is still some way to go for the recovery to be substantial enough to start tapering asset purchases. Inflation is still seen as transitory but is not broadly based and Chair Powell specified that one-off price rises, even if they are not reversed, are no sustained inflation.

Many in the markets are touting the Jackson Hole symposium at the end of next month as the big date for more taper detail. But, with only one NFP jobs report next week to be released before then, is that enough information for the Fed to shift their bias? There are then three FOMC meetings left in the year in September, November and December.

China sooths equity jitters

Equities finished mixed in the US with tech outperforming. Facebook beat earnings expectations but warned of a significant growth slowdown and the stock fell as much as 5% in extended trading. European bourses have started the morning in the green after China took steps to calm recent investor fears which helped the Hong Kong market gain over 3%.

Gold enjoying dollar woes

With the hawks disappointed after the FOMC meeting, dollar selling is helping to push gold out of its recent range. The bullish break is now within touching distance of the widely watched 200-day moving average at $1,822. A strong close above here should see the July highs at $1,829/34 come into view fairly quickly. Solid support sits at $1,789.  

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