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All eyes were on the Fed yesterday for signs the US Central Bank will begin to tighten its monetary policy and shift its focus towards inflation.

In the end the Fed kept rates near zero with members voting to maintain the size and pace of their current stimulus programme. The dollar closed higher as a result with the DXY up 0.8% while equities finished mostly higher although the Dow closed down 0.3%.

Gold closed Wednesday with a gain of 0.9% at $934.40 but off the days high of $941.60, set on the US opening following a short covering rally. Little reaction has been seen overnight to comments from Chinese research officials suggesting China should use more of its $1.95 trillion reserves on energy and natural resource assets rather than US securities.

"Should we buy gold or U.S. Treasuries?" "The U.S. is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall. So gold should be a better choice.

" Whilst these comment are ideal world views it does add further support to the long-term outlook for gold particularly after China broke news of its holdings change in April, and coupled with the Fed’s ongoing QE policy and the inflationary pressures this will create we believe gold will remain supported by dip buyers with further chart support located around $915-18.

Both the euro and dollar are higher against the yen on Thursday, with traders citing yen sales by Japanese industrial companies following the  Fed meeting in the US last night. It seems likely that the US dollar may rise for the rest of this week, according to many dealers and traders, largely as a result of the FOMC not taking additional stimulative measures, such as boosting its Treasury purchase program.

European stocks are expected to open marginally weaker Thursday, with investors happy to book some profits following Wednesday's gains following the conclusion of the latest rate setting meeting from the Federal Reserve.

Renewed euro yen demand emerged, this time lifting the euro dollar to a session high of USD1.3976 before settling back within 1.3950/70 price level into the European session.

The rate is currently trading around 1.3965 with some seeing potential for a further corrective recovery in the rate later in the morning. Offers are seen placed at 1.3975/85, and a break above could open a move toward 1.4000/05, with stops placed on a break of 1.4010.  Support is seen placed at 1.3925/20 ahead of 1.3910/00 and the New York session low at USD1.3888.

The euro pound, which had consolidated Wednesday's corrective pullback by holding under0.8500 between 0.8480/93, has edged back above this figure as sterling continues to pare recovery gains. Cable support is seen at 1.6405/395, and a break here could allow for a deeper move toward 1.6370, with demand from this level extending toward 1.6350. Resistance is seen placed at 1.6470/80 ahead of 1.6500/10.

The pace of the dollar's climb, however, is likely to be slow as most currency traders and dealers are likely to be unwilling to make aggressive bets ahead of the non farm payrolls data and business activity indexes from the Institute for Supply Management due next week. Later in the global day, attention returns to other fundamental news items, and in particular the  U.S. weekly jobless data, and if the figures  show an improvement and push up U.S. stock prices, the dollar may extend its rally further this afternoon.

Higher Japanese stock prices and a positive outcome from the Federal Open Market Committee meeting overnight lifted risk appetite in the financial markets, giving a boost to the dollar and euro which were both up against the yen in Asia Thursday.

Some investors had expected the FOMC might increase its future Treasury buying to support the U.S. economy, which is usually a negative factor for the dollar as the nation's interest rates decline.

So far in Asia, Japanese importers and security firms and non Japanese commodity trading advisers were seen selling the yen in favor of the dollar, euro and Australian dollar. The euro continues to be the grand benefactor of the dollar's weakness, strengthening yet another percent against the USD in overnight trading, and in addition is also stronger against the Swiss Franc and British pound following the SNB's possible intervention. Sterling was well supported by investors,  but USD strength won in the end pushing the pair from USD1.6600 to USD1.6400 late in the US session.

The lack of expansion in US Treasury Buying from the FED supported the dollar post the FOMC statement, while the euros to pounds pair slipped back under 0.8500.

Upbeat assessments on the domestic economy and firmer equity markets lifted the Australian dollar in Asia Thursday, while interest rate futures slumped dangerously close to key support levels, a breach of which could set up further losses.

The pace of economic contraction is slowing” according to the Fed, after they concluded their two day meeting yesterday evening leaving rates on hold at 0 – 0.25%, and signalling no change to the Quantitative Easing (QE) program undertaken earlier this year.

The dollar responded positively to the news after falling off in the lead up to the announcement as investors feared that the Fed may hint towards reneging on at least some of the QE plans for later this year.

While the dollar managed to push higher against fellow low yielders, the pound and euro, it lost ground against high yielding currencies after the Fed also declared that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period”.

Adding further weight to evidence that the bottom is around the corner was forecasts released by the OECD which were more upbeat than normal, stating that worldwide growth prospects had improved, the first time in two years they have done so. They did forecast the eurozone to continue to underperform, and the euro suffered slightly as a result of this. The ECB also lent €442bn to European banks at a rate of 1% yesterday, inferring that lending rates will probably not go lower than this unless the situation takes another turn for the worse.

The Swiss National Bank put its money where its mouth is, and directly intervened in the currency markets yesterday in order to stop the appreciation of the Franc. After talking down the Franc in the last fortnight it sold CHF into the market in order to try and support export growth. The Swiss aren't the only country struggling with a strong currency; others including Australia, Norway and Japan have openly spoken of currency devaluation being beneficial. 

Data out today from the euro zone includes industrial orders and from the US we have initial jobless claims