The Fed minutes for December’s policy meeting are finally out! Several officials discussed that the marginal effects of QE were diminishing and thus, tapering should begin.

The Fed minutes for December’s policy meeting are finally out! Several officials discussed that the marginal effects of QE were diminishing and thus, tapering should begin. We can expect to see a continuation in the reduction of QE in measured steps. Based on the minutes, majority of Fed officials foresee the wind down to be completed by the second half of 2014. Some officials expressed concern over the low inflation rate (since it is below the Fed’s 2% target)  and the low labor participation rate. Hence, not all officials were in favor of minimizing the bond buying program due to these factors. So far, we have seen positive economic data. The 238,000 jobs added to the private sector is at its highest point since Dec 2012. Economists expect Friday’s payroll numbers to be very good based on Wednesday’s strong data. The consensus forecast is that 203,000 nonfarm payrolls were added for the month of December, which is greater than the 196,000 jobs added in the month of November. The prospects for tomorrow’s numbers look very positive, but what if we see a poor NonFarm Payrolls report? This would indeed raise investor eyebrows about the Fed’s next move and perhaps they would consider putting the wind down program on pause. The strength of the USD and strong economic data is not favorable for AU. When investors see the dollar holding strong and the economy performing up to expectations, they  don’t see a need to flee to a safe haven asset, plain and simple as that! Have a great day.