"The week, we really want to be focused on the typical Fed kind of talk—but I also want to look at that jobless claims number, because the Fed is very dependent on data for their December meeting"
- Jeff Kilburg of KKM Financial
The guessing game about when the U.S. central bank will start withdrawing its stimulus programme enters a new round this week, as market are focusing on Wednesday's FOMC meeting. Between Ben Bernanke's speech and FOMC minutes investors will seek to determine whether there will be December tapering, or policymakers would refrain from any bold statements and wait for Janet Yellen entering her position. All eyes are on the Fed's next meeting on December 18, when the Fed could finally make the long-awaited statement that they would start reducing the pace of their monthly bond purchases. In fact, markets ignore that possibility at their own peril, as there is a high possibility of abnormally high volatility before Christmas.
Meanwhile, stimulus programme and ultra-low interest rates have been the main reason of this year's market's advance. Janet Yellen comments that any change to the central bank's accommodative policies is not imminent, have lifted stocks to fresh highs, while any shift to the policy would cause much market turmoil. There is low possibility of taper hints this week; however, taking into account strong payrolls, December's meeting looks like an appropriate time to move. The U.S. Dollar is likely to remain under pressure in the first half of the week, with EUR/USD opening higher and trading above 1.35 already.
© Dukascopy Bank SA