The Fed’s job is never easy.  On the one hand the US economy seems to be recovering, with news this week that there’s been a significant rise in the consumer price index.  On the other, the IMF has cut its US growth forecast. But Saxo’s Mads Koefoed says QE tapering at the FOMC meeting is a 'foregone conclusion'.

Koefoed believes that the Fed will taper another USD 10 billion divided between US Treasuries and mortgage-backed Securities.  QE is currently USD 45 billion so after the meeting he says it should be at USD 35 billion dollars a month.

He’s also watching to see whether there will be changes to the forecasts from the Federal Reserve’s own economists.  Expect a downward revision of overall 2014 growth, he says, because of the poor data from the first quarter.  But Koefoed believes the Consumer Price Report will be revised up and the unemployment rate revised down. 

As for the dollar, Koefoed warns that the markets are perhaps a little hawkish at the moment off the back the strong CPR.  Although he expects a more neutral statement from the Fed, he thinks there could be a ‘knee-jerk reaction high’ on the EURUSD.