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Forex pairs in this Article » GBP/USD (London) - GBP/USD rallied overnight, despite minutes showing that the FOMC is increasingly confident about the economic outlook for the US, and less wary about removing the QE stabilisers. However, the minutes showed that the decision to taper the Fed’s USD85bn of monthly asset purchases was partly concerns about the diminishing effectiveness of the programme, noting that: “"(a) majority of participants judged that the marginal efficacy of purchases was likely declining as purchases continue."

The tone of the minutes suggest that it will take a major negative macro event to disrupt QE tapering, however the FOMC may backload heavier cuts to later in the year to prevent an overly hawkish message.

FOMC minute thin on post-QE plans

Despite Janet Yellen all set to take over the Fed chairmanship at the end of Ben Bernanke’s term on 31 January, the minutes remained unsubstantial on forward-guidance. Yellen has been credited with a push for forward-guidance and improved market communication while service as vice chairman of the Fed, but minutes lacked consensus on any communication of future policies to draw down rates if they begin to rise too quickly for the US economic recovery.

Bank of England more robust in forward-guidance

In contrast to the Fed’s hit-and-miss approach to forward-guidance, Bank of England governor Mark Carney has been consistent and clear in his communication of the central bank’s policies and objectives. While one would usually expect today’s interest rate decision at 12:00 GMT to be a non-event, with rates held at 0.5 percent and no accompanying statement, growing chatter about a potential early rate hike may create a paper-thin chance that the BoE releases a statement quashing those rumours. Carney has been consistent in stating that the BoE will move to hike rates only when the unemployment rate falls below 7 percent and has stressed that the 7 percent rate constitutes a threshold and not a trigger for hikes, suggesting he may let job growth run further before hiking rates.

GBP/USD rallies in early session

GBP/USD has rallied through the morning session, up 0.17 percent on the opening price of USD1.6442. The pair is currently trading at USD1.6474 after a dip to USD1.6447.
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