Morning Forex Fundamental: USD

Morning Forex Fundamental: USD

'At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals' - NAHB Chairman Rick Judson

The U.S. Federal Reserve is expected to start reducing its $85 billion in monthly bond buying not earlier than the last quarter of 2013. The Fed's Chairman Ben Bernanke is likely to halt the unprecedented quantitative easing in the first half of next year, after the central bank's assets will expand to a record of about $4 trillion. In line with expectations, the Fed decided to maintain $85 billion pace of asset purchases and keep its key interest rate close to zero until the unemployment rate reaches 6.5%, which currently stays at 7.7% level.

'They will want to be gradual' in reducing accommodation, said Perli, managing director at International Strategy & Investment Group Inc. in Washington. Fed officials will probably proceed 'on a meeting-to-meeting basis and say, ‘conditions have improved, we've seen progress, we can slow the pace,' then reconvene at the next meeting and see what happened.'

'There is no doubt that the normalisation process will put pressure on financial markets,' says Lou Crandall, economist at Wrightson Icap. 'We suspect that the market psychology response to the prospect of Fed tightening will be abrupt and painful before the Fed even makes any substantive changes.'