At 2pm ET (6pm London) the US Federal Reserve will release the interest decision and the FOMC releases its statement on monetary policy for October, following the conclusion of their two day meeting.
In September the majority of market analysts had expected the Fed to begin to taper the current pace of bond purchases and beginning policy tightening. However the level of bond purchases was left unchanged, giving a bid to precious metals and a boost to equities in the US and Asia. It was believed that the US economy was beginning to turn a corner, as the economic data improved and Fed Chairman Ben Bernanke would taper QE.
Subsequently the political stalemate in the US led to a government shutdown as President Obama and US Representative Boehner jousted over the debt ceiling. The US neared the debt ceiling limit and almost defaulted on its debt for the first time in history, before an eleventh hour agreement. The shutdown was an embarrassing episode for the US, as the government was forced to close its services as it would be unable to meet its obligations if the debt ceiling wasn’t raised.
US employment data has disappointed, with Cctobers US employment report (Non-Farm Payrolls) expected to continue the trend, due to the government shutdown.
The majority of strategists believe that the Federal Reserve statement will strike a dovish tone with analysts eyeing 2014 before any reduction in the current level of QE. If the tone or the announcement surprises the market, there could be significant volatility as traders reposition themselves.
1 hour to go, best of luck.