With the interest rate ammunition locker empty, the FED is resorting to the last line of defence by rolling out the “printing press”, figuratively speaking . Really it is just adding zeros and creating money out of the ether, (I wish I could do the same).  The announcement by the FED that they would buy up to $300 billion in longer-term treasuries and boost its purchases of mortgage-backed securities caused the market to rise vertically.  It came off its highs and then finished the day rising to the close. 

We must also remember that the March futures and options expire tomorrow.  The S&P500 is closing in on the 800 point resistance level.  I think the market being so positive on the FED’s move is a bit premature.  Ask yourself why is this step necessary? Simply, the outlook for the economy has continued to deteriorate. The FED no longer expects a recovery later this year and thinks the most likely outcome is a gradual resumption of weak growth.

Although I do not trade currencies I do track the relative rates against the US$  On the news the US$ tanked and gold rose $24 per oz in a matter of minutes.

The FTSE had closed by the time the announcement was made so missed out on all the excitement so finished down some 46 points.

It will be interesting to see what happens to the market once the March expiry is out of the way and the players have had time to fully consider the implications of the FED’s action.