By TraderVox.com
Tradervox (Dublin) – FOMC decision yesterday gave no indication that the Federal Reserve will make another round quantitative easing. In a statement to the press, FOMC indicated that the economy will recover moderately and that unemployment is expected to decline gradually. According to Robert Rennie, a Chief Currency Strategist in Sydney, the signs of recovery in the US economy will start to offer support for the dollar and this is expected to continue for some time.
After the FOMC announcement, the dollar rose against major currencies as expectations of another quantitative easing reduced. The extra yield investors are receiving for holding two-year US security notes instead of Japanese debt have increase the demand for the dollar hence causing the USD to increase against the yen. Today, investors are waiting for Ben S. Bernanke’s speech at the Independent Community Bankers of America national convention in Nashville where he is expected to touch on FOMC decision.
As expected the FOMC kept the interest rate at between zero and 0.25 percent where it has been since 2008. This is expected to extend until late 2014. As the US dollar jumped on the news of reduced bond buying prospects, the Euro was declining as an ECB official indicated that the central bank was considering means of withdrawing stimulus. This was said by Weidmann, an ECB as the ECB President urged banks and governments in the Euro region to take advantage of the current financial stimulus package. Under normal circumstances this would have caused a bullish trend for the Euro but for the fragile euro area economic status this was not welcomed by investors.
The Fed also released its Stress Test result and cleared 15 out of 19 big banks in the country to raise dividends. This caused the US stocks to rise, further showing the US economy is on a strong recovery path. The FOMC decision is in contrast with the BOJ’s decision to keep its asset purchasing plan on the table hence increasing the fears that Asia and Europe might be on the verge of economic turmoil.
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