| Fed Talks Low Rates, Dollar Drops |
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| Written by Lee Mel |
| Monday, 22 March 2010 14:55 |
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Currency speculators have seemed convinced over the last few months that at some point, the Fed is sure to hike interest rates once it is obvious the economy is in good shape. Based on yesterday's Central Bank rate decision and subsequent announcement, it appears that 'obvious' is far from the thinking of the Board members.
Currency speculators have seemed convinced over the last few months that at some point, the Fed is sure to hike interest rates once it is obvious the economy is in good shape. Based on yesterday's Central Bank rate decision and subsequent announcement, it appears that 'obvious' is far from the thinking of the Board members. It wasn't unexpected that the conclusion of its meeting the Fed would hold onto a zero interest rate stance. But what was of more interest to analysts and investors was the comments on the current condition of the economy and potential future rate decisions. The loud and clear message delivered by the Fed on Tuesday was that rates are not going up anytime soon. As the possibility diminished of a rate increase, the dollar's momentum to rise further has waned a bit. The Euro passed through the $1.38 level early in the week's currency trade for the first time since mid-February. After a dip down, one Euro currently fetches $1.3752. Part of the recent increase in the price of the Euro against the dollar is from recent commentary from Europe putting the pressure on the US government to closely monitor credit swaps that adversely impact the value. The British Pound has seen a similarly strong near-term spike against the greenback, though the Pound saw its near-term low a bit more recently at the start of March when it touched just below $1.50. The Pound currently trades at $1.5299 after reaching as high as $1.5383 in overnight European currency trade. As always in the speculation game, the current sentiment only lasts until thinsg change. If data reports begin to show that economic conditions are getting better, it won't take long for the Central Bank members to spring into action on rate raises. But it seems that right now the Fed is more concerned with preserving current economic conditions in housing, credit, and stock markets. With other housing and loan programs near expiry, the Federal Reserve wants to assure borrowers to find incetives in loan rates and then businesses will be more likely to expand. Unemployment seems to be heading lower based on recent jobless claims and data. Thus, a low interest policy could remain in effect for months. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Stock market commenttary comes from Live Charts UK, where you can find real time charts,share prices and up to date stock market news. |