FED ANNOUNCE BALANCE SHEET TAPER WITH ONE MORE RATE HIKE TO COME IN 2017

DOLLAR SUPPORTIVE

The Federal Open Market Committee choose to keep U.S interest rates unchanged this week, but announced that they would start to tapering the FED'S 4.5 trillion U.S dollar balance sheet in October. The monetary policy statement also said that the Federal Reserve will likely hike interest rate one more time in 2017.

The market reaction after the monetary policy statement was announced, saw the greenback begin to strengthen against all major G-7 counterpart currencies, helping to lift the U.S dollar index away from two and a-half-year trading low's.

BANK OF JAPAN STEADY

The Bank of Japan decided to keep interest rates unchanged at this week monetary policy meeting, as was widely expected by most market participants. BOJ Governor Haruhiko Kuroda also reiterated the Central Bank of Japan's commitment to purchasing Japanese bonds.

The main surprise from the Bank of Japan meeting came from one dissenting vote, from BOJ member Kataoka. The Bank of Japan also said they are still behind their current two-percent inflation target, and they stand ready to add further stimulus if needed.

GOLD UNDER PRESSURE

The price of spot gold moved to its lowest trading level since August 28th, as investors moved away from the yellow metal and into U.S dollars. The price of spot gold fell below $1,300 per ounce following the Federal Reserve meeting after consolidating around $1,315 per ounce mid-week.

Earlier this month, the price of spot gold traded at a twelve-month high, hitting $1,357 per troy ounce. The price of spot has declined in recent weeks as geopolitical risks have subsided, whilst United States economic data has also been improving.

NEW ZEALAND DOLLAR VOLATILE

The New Zealand dollar was increasingly volatile heading into the countries general election, which is being held this coming weekend. The kiwi reacted positively to recent opinion polls, that pointed to ruling National party easily beating the opposition New Labour party.

Earlier this week, the NZDUSD pair moved to a three-week trading high, hitting $0.7430 cents, before later pulling back below the $0.7300 handle, as the U.S dollar moved higher and China's credit rating was downgraded one notch by Standard and Poor's credit rating agency.