There was a swift reaction by the foreign exchange market to the news that the US had decided to pursue a policy of quantitative easing. The announcement, after the Federal Reserve’s open market committee meeting on March 18, sent the dollar into a rapid tailspin and ended a period of broad strength that had started in mid-December.
Euro/dollar soared five cents in the immediate aftermath, climbing from around 1.3000 to 1.3500; sterling was a big beneficiary and cable rose sharply from around 1.3800, where it looked extremely heavy, to around 1.4500, where it started to look rather bid.
The dollar’s sudden trend change appears to have caught many off guard. "Although we had thought that this final step towards full-on quantitative easing was desirable and ultimately necessary, it goes against the grain of recent Fed commentary and comes earlier than we had anticipated,"...
