The U.S. Federal Open Market Committee concluded its monetary policy meeting by holding the U.S. interest rate steady at its record low level. The FOMC had cut the interest rate to a new target range of 0 percent to 0.25 percent on December 16th and said today “that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period”. Today’s unanimous committee decision to keep the rate unchanged was widely expected by market forecasts.
The Fed statement accompanying the rate decision commented on the U.S. economy, “Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit.”
GDP contracts in 1st Quarter by more than expected.
The U.S. economy contracted in the first quarter of 2009 by more than expected according to the latest release by the U.S. Commerce Department. The advance estimate report released today showed that the U.S. Gross Domestic Product contracted at an annual rate of 6.1 percent in the January to March quarter following the 6.3 percent GDP contraction in the fourth quarter of 2008. Today’s GDP numbers surpassed the 4.7 percent contraction that the economic forecasts were expecting for the first quarter and marked the first time since the 1974-1975 period that GDP has shrunk for three quarters in a row.
Contributing to the decreased GDP for the fourth quarter were declines in business inventories, exports and housing. Exports declined sharply in the quarter as exports of goods and services decreased by 30.0 percent after falling by 23.6 percent in the fourth quarter.
On the positive side, consumer spending, which makes up approximately two-thirds of U.S. economic activity, increased in the first quarter by 2.2 percent after decreasing sharply in the previous two quarters.
Forex – U.S. dollar falls in Forex Trading today.
The U.S. dollar has been falling in forex trading today against most of the major currencies. The dollar has declined versus the euro, British pound, Canadian dollar, Australian dollar, New Zealand dollar and Swiss franc while gaining versus the Japanese yen.
The euro has advanced versus the USD for the second day as the EUR/USD trades at 1.3287 in the afternoon of the US trading session at 3:08pm EST after opening the day at 1.3186 according to currency data from Oanda.
The British pound has also climbed for the second day in a row as the GBP/USD trades at 1.4764 after opening the day at 1.4705.
The dollar has gained ground against the Japanese yen today as the USD/JPY has increased from its 96.91 opening to trading at 97.67.
The dollar has fallen against the Canadian dollar after opening at 1.2135 earlier today to trading at 1.2012 later. Meanwhile, the USD has also declined against the Swiss franc as the USD/CHF has gone from 1.1413 to trading at 1.1364.
The Australian dollar has gained for the second day in a row versus the USD as the AUD/USD trades at 0.7274 after opening today at 0.7135 while the New Zealand dollar has also increased versus the USD as the NZD/USD trades at 0.5747 after opening the day’s trading at 0.5653.
EUR/USD Chart – The Euro advancing sharply today versus the US Dollar in Forex Trading for the second day in a row.