SYDNEY, Oct 31 (IFR) - Headlines from Wednesday Night * US Fed funds target rate, 0.25%, f/c 0.25%, and 0.25%-prev * Fed makes no changes to forward guidance, to keep buying USD85bn in bonds, data suggests economy showed further improvement but unemployment remains elevated, fiscal policy restraining growth, recovery in housing has slowed * RBNZ to tighten in 2014, but currency gives flexibility - RTRS * ECB's Costa Portugal needs to deliver on its program and needs to rely on solidarity of European partners, Portuguese banking system facing challenges * Portugal's banking outlook remains negative (Moody's) * Spanish banks to get E28bln core capital boost thanks to state guarantees on tax credits * US ADP national employment Oct, 130k, f/c 150k, 145k-prev * US CPI m/m, sa Sep, +0.2%, 0.2%, 0.1%-prev * US CPI y/y, nsa Sep, +1.2%, f/c 1.2%, 1.5%-prev * US Core CPI m/m, sa Sep, +0.1%, f/c 0.2%, 0.1%-prev * US Core CPI y/y, nsa Sep, +1.7%, f/c 1.8%, 1.8%-prev * US Real weekly earnings m/m Sep, -0.1%, f/c 0.2%, +0.5%-prev * DE CPI prelim m/m Oct, -0.2%, f/c 0.0%, 0.0%-prev * DE CPI prelim y/y Oct, 1.2%, f/c 1.4%, 1.4%-prev * Reuters Poll ECB will announce a new round of cheap long term loans for banks 44/15 economists * Reuters Poll ECB refinancing depo rates stay on hold until at least early '15 * Reuters Poll 46/53 economists say bank of England will bring forward its expectation for when unemployment will reach 7% * CH UBS Sep Consumption 1.56 vs 1.32 prev * CH KOF Oct 1.72 vs 1.53 prev, 1.60 exp * DE Oct jobless 6.9% s/adj vs 6.9% prev, 6.9% exp * EZ Oct Bus Climate -0.01 vs -0.20 prev, -0.15 exp * EZ Oct Econ Sent 97.8 vs 96.9 prev, 97.3 exp * EZ Oct Cons Sent -14.5 vs -14.9 prev, -14.5 exp * EZ Oct Ind Sent -4.8 vs -6.7 prev, -6.5 exp
Themes from Wednesday * The main theme across all asset markets on Wednesday was the market seeing the FOMC statement following the 'no change' decision as being more hawkish than expected and perhaps leaving the door open for the commencement of tapering their bond buying program before the end of Q1 2014 - as the market was previously pricing in.
* Wall Street sold off, USD spiked higher and US Treasury yields staged a volatile reversal higher in the aftermath of the somewhat benign Fed statement.
* While the Fed statement wasn't hawkish by any stretch - the market keyed on two comments within the statement as being less dovish than may were expecting.
* The market saw this comment ('Taking into account the extent of federal fiscal retrenchment over the past year, the Committee sees the improvement in economic activity and labour market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy') as downplaying the impact of the US government shutdown and debt ceiling debate.
* Analysts also noted the Fed removed the September statement reference to tighter financial conditions in the economy - which was viewed as one of the reasons the Fed didn't taper in September.
* The biggest reaction was in the US Treasury market - with the 10-yr US Treasury yield jumping to 2.54% from 2.47% in the wake of the Fed statement.
* The 10-year Treasury yield was pushed down to 2.47% from Tuesday's 2.50% close earlier in the session following a successful 7-year auction; weaker than expected US ADP jobs data and benign core-CPI data.
* The 10-year US Treasury yield settled at 2.52% late in the US session - up from 2.50% at Tuesday's close.
* It was a jumpy day on Wall Street, but the moves were relatively small. The S&P was 0.2% higher early in the session before easing to be down around 0.2% just before the FOMC statement. After the statement the S&P spiked lower to be down 0.8% before closing down 0.5%.
* The US dollar spiked around 0.5% higher following the Fed statement.
* USD/JPY popped from 98.15 to 98.69 in the wake of the Fed statement as the price action followed the move up in US Treasury yields. USD/JPY closed at 98.53 - up 0.4% from Tuesday's close.
* EUR/USD was up before the Fed event, as the weaker US ADP jobs data and lower US Treasury yields pushed the pairing to 1.3787 at one stage from Tuesday's close at 1.3746.
* EUR/USD was trading at 1.3775 just before the Fed statement and then proceeded to plummet to 1.3696 - triggering stops below 1.3710 and 1.3700 along the way. EUR/USD closed at 1.3735 barely changed on the day.
* AUD/USD spent most of Wednesday in recovery mode and traded as high as 0.9517 in Europe. It was trading around 0.9500 before Fed statement and proceeded to spike down to 0.9441 after the statement when stops below 0.9450 were tripped. AUD/USD recovered to close at 0.9482 - unchanged on the day.
* The most volatile currency was NZD/USD. It fell from 0.8260 to 0.8193 after the less dovish than expected Fed statement and then soared to 0.8278 after the more hawkish than expected RBNZ statement.
* Commodities were mixed by the end of the day.
* Gold was riding high for most of the day and traded as high as 1,359 ahead of the FOMC. As was the case with other assets - there was a sharp knee-jerk reaction to the Fed statement and gold was slammed down to 1,334. The price recovered a bit late in the day and looked set to close at 1,342 - little change from Tuesday's close at 1,342.
* Copper shot higher before the FOMC event and held on to the gains when everything else corrected following the Fed statement. Copper was supported by tight supply concerns and evidence of Chinese demand. Late in the US session copper was up 1.35%.
* NYMEX Crude went in the opposite direction and fell over 1.5% after US govt data showed large inventory builds. The spread between NYMEX Crude and Brent Crude is widening at a more rapid pace - as Brent Crude rose 0.8% on the day.
* The US dollar index was last trading at 79.75 up 0.2% on the day.
A closer look at the FX market EUR/USD traded with a bid tone in early Europe and pushed past 1.3750 to 1.3768. EUR/USD was trading around 1.3760 when the US market arrived and chopped between 1.3744 and 1.3778 - led by EUR/JPY flows. EUR/USD traded up to the day's high at 1.3787 just prior to the Fed statement and then proceeded to plummet to 1.3696 - triggering stops below 1.3710 and 1.3700 along the way. EUR/USD closed at 1.3736 - down tiny.
USD/JPY was relatively stable in a 98.06/98.28 range prior to the Fed statement. USD/JPY popped from 98.15 to 98.69 in the wake of the Fed statement as the price action followed the move up in UST yields. USD/JPY closed at 98.53 - up 0.4%.
AUD/USD spent most of Wednesday in recovery mode and traded as high as 0.9517 in Europe. It was trading around 0.9500 before the Fed statement and proceeded to spike down to 0.9441 after the statement when stops below 0.9450 were tripped. AUD/USD recovered to close at 0.9482 - virtually unchanged on the day.
NZD/USD fell from 0.8260 to 0.8193 after the less dovish than expected Fed and then soared to 0.8276 after the more hawkish than expected RBNZ statement.
Wrap-up The Fed didn't give too much away in their statement and the fact there wasn't a Bernanke press conference afterwards made the event that much more cloudy. Fed statements have tended to be more hawkish than the markets expect due to the fact it reflects a wider view at the Fed rather than solely expressing the views of the dovish core of the FOMC voting committee that ultimately calls the shots. The Fed statement was little changed from the Sept statement and indicates the Fed remains data dependent regarding scaling back t
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