Aussie pummelled by Fed Taper as stocks go bid

December 19, 2013

The Fed Tapered but it tempered the taper by restating its commitment to low rates for a very long time which has given stock markets a massive and aggressive lift and confused the heck out of currency traders who will be getting carted out both sides of the trade over the past couple of hours.

So the strong message given that rates will hover near zero for an extended period has buoyed stocks with the Dow up more than 350 points from the low just after the announcement and 279 points on the day for a gain of 1.75% to 16,152 at 7.45 am AEDT with 15 minutes before the close. The Nasdaq is up 1.13%% and the S&P 500 has risen 29 points to 1,809 for a gain of 1.57%.

As the chart shows, this is one heck of a one day rally in the S&P and it might be time for a Santa rally but it needs to get up and through 1,812/14 region to kick on.

In Europe the FTSE was actually a bit nonplussed by the BoE minutes and is up just 0.09% while the DAX, CAC, FTSE MIB and IBEX were all up just over 1%.

Here in Australia trade in overnight futures saw the dec contract of the SPI 200 jump 48 points at 8.00am AEDT to 5149 bid with the March contract up a similar amount.

The SPI 200 is trying to build a base and while 5166 is key overhead resistance unless it takes out the lows recently it is safe for now.

Just incredible volatility in FX markets since the announcement. The range in the Aussie between 6 and 7 am this morning was a whopping 124 points with a low of 0.8819 and a high of 0.8943. It’s now back under pressure as Bernanke has noted the Fed can taper at each meeting in 2014 with the Aussie at 0.8848 and under pressure. The outlook points toward 0.8740/50 at present.

Elsewhere in FX the combination of the Fed and the BoJ has seen USDJPY rocket higher to 103.57 for a gain of 0.9% on the day. Sterling is the big winner though up 1% to 1.6423 while the Euro has been almost as volatile as the Aussie and sits at 1.3689 off 70 points in the last 30 minutes.

I added to my short position this morning and am looking for this to head substantially lower.

On Commodity markets gold is back on support at $1223 an oz. Crude is up 0.57% to $97.77 Bbl while Dr Copper is fixed at $3.37 lb. The Ags were lower with corn falling 0.41%, wheat down 1.13% and soybeans down 1.63%.

On the data front Kiwi GDP is out as is the RBA Bulletin and Japanese economic indices. Retail sales in the UK tonight, jobless claims in the US along existing home sales and Philly Fed manufacturing index are also out.

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