Dollar Tanks on Fed Stance
Jun 27th, 2008 | By Doug Casey | Category: US Dollar & Forex TradingIn the currency market, the dollar slipped further against the euro. Late Thursday, the euro was trading at $1.5757 vs. $1.5683 on Wednesday.
As with the metals, analysts were talking Fed yesterday. “The current dollar decline reflects an adjustment in traders’ expectations towards U.S. interest rates after the [Fed] policy statement added a phrase describing the ‘downside risks to growth’, while making a clear upgrade in its inflation alert,” said Ashraf Laidi, chief foreign exchange strategist at CMC Markets.
“Despite the Fed’s explicit recognition of higher inflation in the statement, we consider this language largely a rhetorical shift aimed at managing interest rate and currency market expectations rather than setting up for an actual rate hike,” Laidi added.
Most seemed to concur with that, as futures traders scaled back bets on a rate increase in the next three months. Interest-rate futures now reflect a 29% chance the Fed will keep borrowing costs at 2% in September, compared with just a 2% chance a week ago.
The Commerce Department released its final figures on growth and inflation for the first quarter yesterday, pegging GDP at a 1% annual growth rate and core CPI at 2.3%. The former was a 0.1% upward revision, the latter 0.2% higher than originally thought.
And the National Association of Realtors said re-sales of homes and condos inched up by 2% from April to May, slightly below expectations. But the median sales price was down 6.3% in May, year over year.
Source: Dollar Tanks on Fed Stance
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.