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“The pace of economic contraction is slowing” according to the Fed, after they concluded their two day meeting yesterday evening leaving rates on hold at 0 – 0.25%, and signalling no change to the Quantitative Easing (QE) program undertaken earlier this year. The dollar responded positively to the news after falling off in the lead up to the announcement as investors feared that the Fed may hint towards reneging on at least some of the QE plans for later this year.

While the dollar managed to push higher against fellow low yielders, the pound and euro, it lost ground against high yielding currencies after the Fed also declared that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period”.

Adding further weight to evidence that the bottom is around the corner was forecasts released by the OECD which were more upbeat than normal, stating that worldwide growth prospects had improved, the first time in two years they have done so. They did forecast the eurozone to continue to underperform, and the euro suffered slightly as a result of this. The ECB also lent €442bn to European banks at a rate of 1% yesterday, inferring that lending rates will probably not go lower than this unless the situation takes another turn for the worse.

The Swiss National Bank put its money where its mouth is, and directly intervened in the currency markets yesterday in order to stop the appreciation of the Franc. After talking down the Franc in the last fortnight it sold CHF into the market in order to try and support export growth. The Swiss aren’t the only country struggling with a strong currency; others including Australia, Norway and Japan have openly spoken of currency devaluation being beneficial. 

Data out today from the euro zone includes industrial orders and from the US we have initial jobless claims

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