Fed Tweeks Contingency Lingo, Turning to ECB

The only meaningful change in today's FOMC statement is more willingness to carry out contingency plans by stating: will closely monitor incoming info" "will provide additional accommodation as needed, from Junes statement: prepared to take further action as appropriate. The Bernanke Fed hands the stimulus torch back to Draghi, on whom the onus of further market up-lift shall fall. Take a LOOK AT OUR NEW FORMAT PREMIUM INSIGHTS BELOW:

US DOLLAR RALLIES ACROSS Dollar rallies across the board, hitting metals and risk currencies as the Fed further softens its economic outlook without extending the period of exceptionally low rates from its existing 2014 to 2015.

INTERESTINGLY, GBPUSD is down on the day twice as much than EURUSD (-0.63% vs -0.35%) as the euro may be relying some sort of action from the ECB in tomorrow's meeting, such as signalling a restart of SMPs and potentially paving the road for a 4 or 5 year LTRO in September.

Fed is well aware of the DIVERGENCE between the broadening macro deterioration in the US/world, and the notable improvement in market metrics (EUR-OIS spread is at 12-month lows, G10 equities are only 3-5% below their 2012 highs, VIX at 5 points above its 5-year lows and Spanish and Italian 10-year govt. yields are 10-15% off their highs).

Recall, that the euro is up mainly on last weeks statements from the ECB and not from improving data.

Such stabilization in overall risk appetite has clearly reduced the urgency of implementing the Feds additional measures. This has been the modus operandi of the Fed these days.

Quick Look at our NEW FORMAT PREMIUM INSIGHTS http://yfrog.com/es2g0lgj

Ashraf Laidi