Markets continued to process the Federal Reserve inaction and apparent dovish approach to monetary policy. The new Chairman,Kevin Warsh, stated his ‘tools’ are limited and has voiced his preference for a low-interest-rate economic environment. Markets are questioning this in the bond market, with yields creeping higher and higher, defying Fed policy. Banks love higher interest rates as it directly corelates to profit. The US Dollar was again dented by the Fed policy, with the EUR rising to 1.1520, while the GBP jumped to 1.3470.Commodity currencies also enjoyed the softer reserve, with the AUD rising to 0.7035, while the NZD approaches 0.5900. The Bank of Japan followed the Fed and the Bank of England, to leave rates unchanged. This was no surprise but the Yen weakened to such an extent, that the Bank of Japan was rumoured to have intervened, to support the Yen late in the week. All eyes remain on the Middle East and energy prices.
