Market wrap: US dollar was volatile ahead of 'non-event' FOMC - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: Ahead of the FOMC the US dollar was volatile, US bond yields fell, and equities made fresh record highs. After the FOMC (on hold as expected) bond yields rebounded.

Interest rates: US 10yr treasury yields fell from 2.39% to 2.35% ahead of the FOMC and partly retraced to 2.38% afterwards. Fed fund futures yields firmed slightly post-FOMC, pricing the chance of a December rate hike at 98%.

Currencies: The US dollar index is up 0.3% on the day, firming slightly after the FOMC. EUR was also volatile, slipping overall from 1.1650 to 1.1610. USD/JPY ground higher from 113.80 to 114.20, the safe-haven yen and Swiss franc the day’s underperformers. AUD ground higher from 0.7650 to 0.7696. Outperformer NZD extended its jobs data gains to 0.6931 but later settled around 0.6890. AUD/NZD retraced some of yesterday’s fall, from 1.1080 to 1.1150.

Economic Wrap

US private sector payrolls (ADP) rose 235k in Oct (vs 200k expected), still somewhat distorted by the hurricanes. ISM manufacturing activity slipped to 58.7 (vs 59.5 expected) – still elevated, considering September’s 60.8 was a 13-year high.

The FOMC left the 1.00% to 1.25% rate band unchanged, as was widely expected. in a 9-0 vote. The economic outlook was upgraded slightly to "economic activity has been rising at a solid rate despite hurricane-related disruptions" from previous descriptions using the adjective moderate. Apart from a hurricane-related increase in fuel prices, core inflation was seen as still soft. Near term risks to the outlook are roughly balanced, the statement overall consistent with a December rate hike."