Dollar rallies after Fed ends QE, as markets await UK public finances – business live | Business

Federal Reserve Chairman Janet Yellen at Wednesday’s news conference after a two-day Federal Open Markets Committee (FOMC) policy meeting in Washington DC. Photograph: Joshua Roberts/Reuters

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The US dollar is rallying this morning after the Federal Reserve took the historic step to start unwinding its quantitative easing stimulus package.

Investors around the globe are digesting the Fed’s decision, which came alongside a commitment to keep raising interest rates if the US economy continues to strengthen.

As we live-blogged last night, Fed chair Janet Yellen fired the starting pistol to unwind QE. From October, the central bank will slowly trim its holdings of US government debt, and mortgage-backed bonds.

The decision to start normalising the Fed’s $4.5 trillion balance sheet is another milestone in the recovery from the worst financial crisis in generations.

Our US business editor Dominic Rushe explains:

The move, announced after a two-day meeting by Fed officials, will start the gradual reduction of the central bank’s $4.5tn portfolio of bonds and other securities, bought to keep interest rates close to zero in an attempt to kickstart the economy.

“The basic message here is that US economic performance has been good,” Fed chair Janet Yellen said at a press conference. The Fed’s decision had been made because “we feel the US economy is performing well” but she added the Fed could reverse course if conditions changed.

Yellen also said it was a “mystery” why inflation hasn’t reached target, but the Fed remains confident that it will get there in the end.

Markets have reacted by driving the US dollar up against other currencies.

DailyFX Team Live

US Dollar Rallying as FOMC Signals Start of QE Unwind Next Month via @CVecchioFX

September 20, 2017

The greenback has hit a two-month high against the Japanese yen, at ¥112.645. It has also driven to a 10 week high against the Indian rupee.

The stronger dollar has also sent gold down to a three-week low.

Traders now reckon there is a 64% chance that the US Federal Reserve presses on and raises interest rates in December; potentially hurting American borrowers, and pulling capital out of emerging markets and back into US assets.

Stock markets, though, seem to be taking the move in their stride…

Holger Zschaepitz

Asia stocks edging higher w/ reflation theme extending following Fed decision to begin bal sheet normalization & BoJ on hold. Dollar shines.

September 21, 2017

Also coming up today….

  • 9am: European Central Bank publishes its monthly bulletin. This may contain clues about how the ECB will slow its own stimulus programme
  • 9.30am BST: The latest UK public finances, which will show how much Britain had to borrow to balance the books in August. Economists expect that borrowing hit £7bn, up from a small surplus in July.
  • 1.30pm BST: US weekly jobless figures. Has the recent hurricane season hurt the labor market?

We’ll also be watching Ryanair, which faces a bruising encounter with shareholders at its AGM in Dublin this morning.

The budget airline faces a deepening crisis over its decision to axe up to 50 flights per day, to allow staff to clear a backlog of holiday.

We have learned that Ryanair customers face the threat of a fresh wave of flight cancellations as the airline’s pilots prepare to reject an offer of a cash bonus if they give up days off.

The Guardian has obtained a draft letter signed by Ryanair pilots from across Europe, rejecting the offer and warning they will now “work to rule” – refusing to work beyond their basic contractual obligations. Ryanair had told pilots earlier this week that if they declined the £12,000 payment more flights might have to be scrapped.

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