Dollar rebounded strongly overnight as Fed struck a more hawkish than expected tone in the FOMC statement. Fed announced to end the so called QE3 as widely expected and left rates unchanged near zero. The third round of quantitative easing began back in September 2012 and will total around USD 1.,6T in security purchases, including USD 818b in MBS and USD 785b in treasuries. It's expected that Fed's balance sheet would finally peak just shy of USD 4.5T, slightly higher than 25% of nominal GDP. Before the statement, markets were pricing the first hike in around October 2015. However, the statement argued that the first hike could happen closer than Fed's own expectation, that is around June 2015. Thus, markets pull ahead the expectations and gave dollar a boost.
While FOMC maintained the language of keep rates at current low level for a "considerable time", there are two points in the statement that gave the greenback a lift. Firstly, Fed upgraded its assessment on the job market as it noted that "labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate". More importantly, "a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing." That's was a significant change comparing to September's statement which mentioned that the slack was significant. Secondly, even though inflation will likely be held down in near term, FOMC maintained that " likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year." This suggested that Fed isn't too worry about the risk of disinflation.
RBNZ left OCR unchanged at 3.50% as widely expected. The most important change in the accompanying statement was that RBNZ dropped the line "we expect some further policy tightening will be necessary to keep future average inflation near the 2 percent target mid-point and ensure that the economic expansion can be sustained." In today's statement, RBNZ just said that "a period of assessment remains appropriate before considering further policy adjustment. This argued that the central bank might not raise interest rate again even if inflation climbs again.
Elsewhere, BoC governor Stephen Poloz said that there was "considerable excess capacity and that continued monetary stimulus is needed to close the gap." Meanwhile, he also said that “forward guidance will be reserved for times when we believe the benefits to its use are clear - periods of market stress, periods when traditional monetary policy tools are constrained."
On the data front, Australia import price index dropped -0.8% qoq in Q3. Swiss UBS consumption indicator, KOF leading indicator, German employment, Eurozone confidence indicators will be released in European session. But main focus is in US Q3 GDP which is expected to show 2.9% annualized growth. US will also release jobless claims.