British Pound Sterling Surges against the US Dollar; GBP/USD over a percent higher in wake of FOMC event

• The pound sterling to US Dollar exchange rate is a whopping 1.24 pct higher at 1.6100 at 20:40 London time.
• The US Dollar to pound sterling (USD/GBP) is thus at at 0.8064.

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US Federal Reserve gives the market a shock

The market reaction to tonight's events in the US is all that is needed to confirm market traders were not prepared for the outcome; the FTSE 100 is currently tipped to open 1.2 pct higher, gold prices are 4 pct higher.

A surprising “no-tapering” announcement from the US Federal Reserve’s Open Market Committee was delivered this evening.

A majority of analysts and market watchers had predicted the Fed would Wednesday would lay out the specific timing of a scaling back of its $85 billion-a-month bond-buying program.

Fed chairman Ben Bernanke signalled in July that the stimulus would be probably cut back, and that such a move could be announced in September.

But the FOMC opted to leave the scheme intact for now.

The committee said it saw "improvement in economic activity and labor market conditions".

"However, the committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases."

Brad McMillan at Commonwealth Financial said:

"No taper, the market loves it. We will see if that lasts but boy, we are off to the races.

"From a short-term stock market perspective it can be seen as a good thing because the market likes to see continued Fed stimulus. From a real economy standpoint, what it says is the Fed is actually more nervous about the economy than is generally perceived."

The Fed also lowered its forecasts for economic growth. It now sees growth in a 2 percent to 2.3 percent range this year, down from 2.3 percent to 2.6 percent in its June estimates.

The downgrade for next year was even sharper, 2.9 percent to 3.1 percent compared with 3.0 percent to 3.5 percent.