It was Fed day in the United States and this was obviously the main highlight in NY trading. That the committee would leave rates unchanged at 0.25% was a given, thus the focus promptly shifted to the press statement. Here the Fed was broadly status quo.

The one area that saw notable changes was the section on the economic outlook. Employment was still seen as an overhanging concern, but this was similar to the prior statement and only a small vocabulary change was present. Business spending was upgraded to being described as having risen significantly from appearing to be picking up. This was balanced by a downgrade to housing, which is now viewed as declining and at depressed levels from merely contracting at the January confab.

Two crucial areas of focus for the markets were whether the Fed would leave in the extended period language and announce that the MBS purchases would conclude as planned. In both instances, there was no disappointment. The committee noted once again that current conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. On the MBS front, they affirmed that the purchases are nearing completion and will be executed by the end of the month.

Risk loved the steady as she goes Fed and equities rallied smartly into the close. This kept the yen crosses better bid and helped the so-called commodity currencies extend to fresh intraday highs as well. The upside in EUR/USD continues to be capped by what is seemingly protection of an option barrier at the 1.3800 level. Aside from that pair, we would think the risk on price action should continue to permeate the markets as we trade into the overnight sessions.