Fed Sounds More Optimistic on Growth | IFCM
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Fed Sounds More Optimistic on Growth - 14.3.2012

US Dollar The dollar rallied against its major counterparts yesterday and accelerated gains in Asian trading hours today after the Federal Reserve’s Open Market Committee improved its assessment of economic growth. The Committee said in a statement that “the unemployment rate has declined notably in recent months, but remains elevated.” However the central bank policy makers now expect the economy will maintain moderate growth path with unemployment declining gradually, reducing bets that the Fed will need more monetary easing. At the same time the target range for the federal funds rate was left unchanged at 0%-0.25%. Markets reaction to the central bank’s statement was rather positive. US S&P 500 stock index advanced by 1.81%, reaching the highest level since June 2008 - 1396.13, while DJIA added 1.68%, reaching the highest level since December 2007 - 13193.12. Reflecting the decreased risk aversion sentiment, the benchmark yield of 10-year treasury notes rose to 2.12%, the highest since October 2011. The dollar strengthened as well, sending the currency’s index to a 7-week high - 80.32. Euro The single currency fell under pressure against its US counterpart, as investors lowered bets that the greenback’s value will be eroded with further monetary easing. Today CPI data releases in the euro area may be important for the euro, having potential effect on ECB policy decisions. According to preliminary estimations, the core measure of inflation increased from 1.5% to 1.6% in February, while general CPI growth pace accelerated from 2.6% to 2.7%. Another report may show some improvement in the region’s industrial production data in January. In Asian trading hours the euro slid to a 4-week low 1.3030 against the dollar. Australian Dollar The Australian dollar maintains a tight range against the greenback this week. Yesterday the Aussie rallied to 1.0560 after touching on Monday a 7-week low 1.0469. During the morning session the currency dropped back toward 1.0500 after the Bureau of Statistics reported that Australian consumer confidence fell considerably in March. The sentiment index, based on consumer expectations, dropped by 5% to 96.1, the lowest level since December 2011. A day earlier another report showed the amount of home loans fell by 1.2% in January from the previous month.
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