Search
0
0
FOMC Instant Insight: Fed Holds Onto Its Ammunition
Tue, Sep 16 2008, 19:28 GMT
by Kathy Lien
To the surprise of the financial markets, the Federal Reserve left interest rates unchanged at 2 percent. Going into the meeting, everyone thought that the Fed was backed into a corner and would have no choice but to cut interest rates by 25 and possibly even 50bp. Although the tone of the FOMC statement was relatively cautious, the action or more specifically, the lack of action by the Federal Reserve indicates that they are not going to bend to the market's pressure.
One of 2 things probably compelled the Federal Reserve to hold back today - with liquidity injections and 325bp of easing since August 2007, they probably believe that they have done enough. Or they have injected so much liquidity into the financial system today that they want to give the markets the opportunity to respond. If things get worse they can always cut interest rates in October or between monetary policy meetings.
Equity traders are not going to like the outcome of the Fed meeting because they were hoping that a rate cut would help to stabilize the financial markets and prevent another bloodbath in the stock market. At this point, the Dow hitting 10k is not only possible but increasingly probable. Without the help of the Fed, things could get worse for the banking sector.
For the US dollar, this is good news because the recent correction was triggered by the readjustment of interest rate expectations. Now that the Fed has failed to deliver, dollar bulls have a reason to jump back into the markets, especially with the stimulative impact of $91 a barrel oil. We expect the downtrend in the EUR/USD and GBP/USD to resume. USD/JPY should also trickle lower as US equities sell off.
Published on Tue, Sep 16 2008, 19:33 GMT
Global Forex Trading Ltd
| 4760 East Fulton Road, Suite 201, Ada, Michigan, U.S.A
http://www.gftforex.com/ | info@gftforex.com
Legal disclaimer and risk disclosure
This forum and the information provided here should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. The views of the author are not necessarily those of Global Forex Trading, its owners, officers, agents or employees. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Cornelius Luca will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Cornelius Luca do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.Interested in forex trading? forex brokerage firms!
FXstreet.com will give you a 3 months membership as soon as minimum rebates have been generated (€150 for private trader/ €300 for corporate trader)
[Read Premium full description]
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
©2008 "FXstreet.com. The Forex Market" All Rights Reserved.