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FXstreet.com (Barcelona) - In December, markets continued to see their fortunes substantially determined by policy makers. Globally, the US Federal Reserve, US Government and Bank of Japan were key players. The resulting rise and fall of optimism over the month was mimicked by the NZD/USD, while he resulting weakness in the JPY saw the NZD/JPY surge.

On a global basis, the US took center stage. Mid-month, the US Federal Reserve announced it would undertake USD $45 billion of outright Treasury purchases, in addition to ongoing monthly purchases of USD $40 billion worth of mortgage-backed securities. According to the BNZ Analyst Team, "This was at the upper end of analyst expectations helping boost risk appetite." In addition, the Fed changed its guidance regarding how long rates would remain "exceptionally low".

From a time variable "at least through mid-2015", it shifted to an economic variable i.e. for as long as the US unemployment rate remains above 6.5% (assuming inflation is not seen rising above 2.5% over the medium-term).

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