The reaction to yesterday's FOMC decision, member projections and press conference has sent shockwaves through global markets overnight. The Fed blamed recent softness in economic numbers on disruptions from winter storms and drive on with tapering indicating that is plans to continue reducing QE purchases at a measured pace but that it could change its plans depending on employment and inflation conditions (same as the last two meetings). What is most interesting about this market action is that beyond tapering, the outlook appears more dovish. The Fed dropped 6.5% unemployment as a threshold rate for action and indicated its concern about inflation running below 2%. Meanwhile expectations among FOMC members on the first interest rate increase shifted even more firmly into 2015 and the lone dissenter, Minneapolis Fed’s Dr. Kocherlakota was on the dovish side, expressing concerns about low inflation. Traders instead focused in on comments from Dr. Yellen that the lag between the end of tapering and the start of interest rate increases could be six months, which means that if tapering ends in December, rate increases could start in mid-2015, earlier than had previously been thought. A chart that showed a cluster of members expect a Fed Funds rate of 1.00% by the end of 2015, 1.50%-2.50% by the end of 2016 and 4.00% in the long run was also taken as a hawkish sign. The shocking truth (to some) that yes interest rates can actually go up too sent a rude awakening to those who had become too complacent lately. This has sparked a big rally in USD sending it up 1% against nearly all of the major paper currencies while driving gold and silver down sharply. GBP has been one of the better performing currencies as it benefits from speculation that an improving UK economy may push the Bank of England to start raising rates as well. Traders should note that there is a difference between normalizing rates (bringing them in line with inflation, a sign of an improving economy) and tightening (taking rates above inflation to slow an economy). Energy and crude commodities have fallen but at a slower pace than precious metals suggesting they may be getting some support from their political risk premiums. Natural gas, however, continues to get slammed hard as its seasonal selloff continues. Resource currencies have been impacted with NOK down about 1.5%, NZD down about 1.3% and AUD and CAD down about 1%. China indices have been hit particularly hard along with CNY which continues to weaken on concerns of slowing growth and a possible complications of two-way trading in the currency. Downward momentum has carried through overnight trading and the fallout from the Fed meeting may continue to impact trading today, along with a number of economic indicators due later this morning. Corporate News Lennar $0.35 vs street $0.28, revenues $1.36B vs street $1.25B as housing market continues to recover Economic News Economic reports released overnight and this morning include: US jobless claims 320K vs street 322K NZ Q4 GDP 3.1% as expected vs previous 3.3% Switzerland interest rate street 0.00% no change expected FOMC Decision and forecasts from yesterday include: US QE3 decision $10B taper to $55B as expected US interest rate decision 0.25% no change expected FOMC Member projections for 2014 GDP 2.8-3.0% from 2.8-3.2% Unemployment 6.1-6.3% from 6.3-6.6% PCE inflation 1.5-1.6% from 1.4-1.6% Poll of FOMC members on first rate increase 2014 1 down from 2 2015 13 up from 12 2016 2 down from 3 Economic reports due later today include: 10:00 am EDT US Philadelphia Fed street 3.2 vs previous (6.3) 10:00 am EDT US existing home sales street 4.60M 10:00 am EDT US leading index street 0.2% 10:30 am EDT US natural gas street (60 BCF) 4:30 pm EDT US bank stress test results

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