Looks like the market was right to fear the Fed could add to its announced $1.1 trln in purchases of US bonds in advance of the last FOMC meeting. That idea was in fact discussed but was not adopted, according to the minutes of the April meeting. The will keep it on the backburner and add to bond buys if the economy falters, the minutes say.
Deflation risks have diminished (so all this may be moot) and the pace of contraction has diminished as well, the minutes say. The overall outlook was brighter but a return to trend growth could take 5-6 years.
Net, the Fed holds in reserve the idea of buying more bonds but won’t do so unless the economy falters further. This is neutral for the dollar and supportive for stocks…though the way we’ve been going, if it is good for stocks, it’s bad for the dollar!
EUR/USD trades at 1.3805 after a spike to 1.3830; just enough to trigger the 1.3825 barrier.
Cable’s overcome the 1.5725 level which was the top dating back to mid-December.