Interest Rate Cut Sends the Dollar Down Across the Board
The Dollar took a big plunge on the heels of the Federal Open Market Committee’s surprising move. On Tuesday the Fed slashed rates to the floor, down to 0.25%. Most analysts had forecasted the rate to sit at 0.5%. The Fed seems to be sending a clear sign that they will supply the necessary liquidity to the market, as U.S. Interest Rates will effectively be 0%. Other aggressive measures that may be taken by the Federal Reserve are buying agency debt, mortgage debt, and perhaps even U.S. treasuries. Flooding the market with Dollars for liquidity purposes is likely to be the reasoning behind the Fed’s actions.
The EUR/USD ended the day at 1.4430, breaking a key 1.4400 level. Big price jumps were seen as early as yesterday morning from low levels of liquidity, as the year end approaches along with the holiday season. The GBP/USD closed up 1.5533, and the JPY strengthened to a 13 year high to close at 87.71.
More negative U.S. Unemployment Data is due today at 1:30pm GMT. Look for the Dollar to continue its plunge, perhaps to the 1.4600 level by the days end. The low U.S. Interest Rates may signal continued weakness in the Dollar going forward. With an Interest Rate effectively at 0.0%, this will give investors little advantage to hold Dollars over other currencies.
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Hi. My name is Jim Johnson and I am a forex trader. I've been trading Forex since 2002. When I understood how challenging is this job, I decided to become a professional in this industry. It was a beginning point of my career and I researched a conception and structure of Forex market in my Diploma paper. Over the past couple of years I've read a lot about FX trading and I created this blog to share my experience. Enjoy your stay on the site!