Just out from Citi’s Steven Englander
Fed leaves EM to twist in wind
From the viewpoint of domestic US economic conditions the Statement is completely anodyne. From the point of view of EM, the Fed has just said “hasta la vista, baby”.
The comment on US growth was a not surprising upgrade in the growth assessment – economic activity ‘picked up’ rather than ‘is expanding at a moderate pace’, but very little else changed other than the expected USD10bn additional tapering. There were no dissents and no changes in the forward guidance language. Since the announcement MXN and AUD are down about 0.4%, so there is modest disappointment in high-beta currencies. The S&P is down about 10points, taking down US Treasury yields which initially spiked but have since dropped.
On these asset market conditions look to JPY , CHF and EUR to do well, commodity currencies and EM to do poorly.