■ Fed removes ‘patient’ from monetary policy statement

■ Fed sees moderation in U.S. economic recovery, sending dovish message to markets

■ S&P500 (SPY) records 2.7% weekly gain, 1.2% of this on Wednesday's Fed statement

■ FTSE 100 at new all-time high

■ USD weakens by 3.1% vs. EUR during week, following four consecutive weekly appreciations

On December 17th 2014, the Federal Open Market Committee released a monetary policy statement which said that "the Committee judges that it can be patient in beginning to normalize the stance of monetary policy." This language replaced a previous one by which the committee anticipates that "it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time…." This era of "patience" saw many central banks moving towards easing monetary policy through rate cuts and the likes, working in the opposite direction from the forthcoming Fed's move, once it loses patience.

The Fed's swimming against the tide has led to a continually strengthening of the U.S. Dollar. For example, aided by the European Central Bank's asset purchase program, the USD appreciated by approx. 15% vs. the EUR in the three months following that day in December. A strengthening Dollar implies more headwind for U.S. exporters, as these would have higher local costs for manufacturing their produce. With the Fed's dual mandate also focusing on the labor market, we believe that the USD's appreciation had already made one or two warning bulbs blink at the Fed's control room. Last Wednesday was scheduled to host yet another policy statement by the Fed. Contrary to the said problematic implications of tightening Fed policy forecast, this time, the media's consensus saw the Fed to drop "patient" from its statement, as it marches on at the path to monetary tightening.

Making a statement you'd rather avoid

Coping with the aforementioned side effects, Wednesday's statement did see the word patient removed from it. However, the Fed also seems to have taken any measure at hand to convey a dovish message. Among these, the FOMC was said to see growth moderating somewhat, from a previous solid pace of growth for economic activity. Export of growth was also said to have weaken. Replacing patience in the Fed's guidance, it was said that an increase of rates remains unlikely for April and that "The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term".  The subsequent press conference also saw Fed Governor Yellen add that "Just because we removed the word patient from the statement doesn’t mean we are going to be impatient.”

The message from the Fed seems to have passed clearly to the markets, as indicated by many assets. The USD itself recorded significant strengthening, as it briefly spiked as much as 3.8% vs. the EUR and 1.3% vs. the JPY. U.S. equity, unsurprisingly, also ended the day in the green, with the S&P500 adding 1.2%, rising to its highest levels since the beginning of the month. Similarly, the Nasdaq Composite (QQQ) gained 0.9%. Oil's reaction has also been rather significant, gaining 7% on the Fed's statement, to USD 45.4 per bbl. No future prospects in the bond market also meant that gold is more appealing as means of securing one's capital, helping it gain some 1.6% during the day.

Wednesday's stimulus has been quite kind to U.S. markets on a weekly resolution, with the S&P500 adding a total 2.7%, following three negative weeks. Europe, didn't share much of Wednesday's boost. But it did see the DAX adding 1.2% during the week and the CAC 40 up by 1.5%. The FTSE has had quite a positive week, as it gained 4.2% on a very solid weekly session. Concluding the week at 7022.51 points, the index also set a new all time-high record. Oil prices have lost some ground on Monday's and Tuesday's sessions. But the Fed's aid, alongside a strong Friday session have helped the black gold add 2% during the week, ending at USD 45.7 per bbl.