As what has been mentioned in the previous report, the USD reacted and took a direction after the Fed’s decision of tapering as it has been fully priced in the market and the pace of tapering can be the next market concern in the coming period after the Fed has lowered its monthly MBS buying by $5b and also Treasuries buying by $5b on the improving of the labor market conditions as it has referred mainly in its assessment.

The Fed will continue buying from now on $35b of MBS monthly and $40B of Treasuries after this decision which can be named the first tightening action of its QE policy which reached its widest pace on 12^th of last December meeting when it has decided to buy $45b of US Treasuries monthly to be added to $40b have been deployed on 24^th of October 2012.for buying monthly Mortgage-backed securities.

The release of Oct US ISM manufacturing index could add more strength to the greenback to press the single currency down further below 1.35 psychological level as it rose to 56.4 while the market was waiting for retreating to 55 from 56.2 in September.

The single currency has been already under pressure since the release of Oct EU HICP flash reading yesterday which has shown falling to 0.7% y/y while the market was waiting for 1.1% as the same as September to be added to the weakness of the US labor market which has been highlighted too yesterday by reaching a new high unemployment rate in September at 12.2% while the consensus was referring to easing back to 12% from 12.1% in August to drive the speculations of having another easing step by the ECB higher.

Here, I should remind you with the recent easing movement by the ECB which has been on 2^nd of last May by cutting the interest rate to 0.5% from 0.75% when the unemployment rate rose in April to 12.1% with easing of April HICP to 1.2% yearly suddenly from 1.7% in last March while the ECB yearly target of this indicator is 2% to show that the inflation is actually subdued and well-anchored.

The cable is still trading just below 1.60 psychological level after it could be under pinned by the risk appetite returning to the market with greater hope for reaching a compromise about the debt ceiling and the US governmental partial shutdown.

The risk appetite has been supported from another side by the Fed’s officials’ comments which started to show the market tendency to having no cut of the current QE for longer time that what has been foreseen before the current political conflict about the debt ceiling in US as the Federal Reserve of St. Louis James Bullard who is a voter on the monetary policy this year said that it is less likely to reduce its bond-buying program this month with the current fiscal problems in Washington which have changed the odds about it and also John Williams who is  the Federal Reserve Bank of San Francisco President indicated that the current monetary stimulus remains necessary and it will support faster economic growth next year and cutting it should be by a gradual way.

The markets are looking quite today with no new clues of the US political crisis and no US labor report to be released in the first Friday of the month to contain the market sentiment.

While evaluation the impact of the current US partial government shutdown on the economy is what containing the pundits specially as it can be extended or turning into total shutdown with no political compromise yet to save the government from the default scenarios.

We have seen Obama in the first meeting following this shutdown with the Congress leaders in the white house this week coming sending a message that it is still soon to have a solution