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Forex pairs in this Article » EUR/USD (London) - With the EUR/USD and a majority of majors climbing to highs vrs the dollar, the market is calmer ahead of FOMC tomorrow. Stephen Gallo, Head of European FX Strategy at BMO pops the query as to “how will Fed monetary policy evolve after the September FOMC”.

Key Quotes:

“We’re now just over 24 hours out from the September FOMC statement. It’s a bit unfortunate that Summers has managed to inject an added layer of uncertainty into the outlook for US monetary policy, in light of the enormous impasse financial market participants have hit with the first layer. Specifically, how will Fed monetary policy evolve after the September FOMC?”.

“However, we should recall that Fed tapering does not solely concern the US macro economic picture”.

“The Fed also has the global monetary system and the flow of capital worldwide to look after as well. If the markets are likely to be comfortable with Yellen at the helm, then the administration should waste absolutely no time in confirming her nomination. If Yellen is already basking in the approval of financial market participants at large, it may actually be easier for the Fed to be firm with tapering from time to time with a known “dove” at the helm. Yellen can serve as a “human anchor” regarding the Fed’s commitment to keeping volatility in rates and output to a minimum”.
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