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Market Review - 31/10/2007 22:26 GMT
Euro rallies to fresh record high of 1.4508 after Fed rate cut
The single currency retreated briefly after the widely expected 25 basis points interest rate cut by the Federal Reserve and then rallied to a fresh record high of 1.4508 on the rally in U.S. stocks.
The Federal Open Market Committee decided to lower its target for the federal funds rate by 25 basis points to 4.50%. The FOMC vote to cut Fed funds rates was 9-1, with Hoenig preferring no change. The FOMC statement indicated economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance, however, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Yesterday's interest rate cut combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets.
The greenback also retreated briefly versus the Japanese yen from intra-day high of 115.51 to around 114.88/90 after the interest rate decision and then rebounded later in the day due to renewed cross selling in jpy on the rally in U.S. stocks. Euro, aussie and sterling rallied against the Japanese yen to 167.28, 107.82 and 240.18 respectively. The British pound rose to a 26-year high of 2.0825 and the greenback weakened versus the Swiss franc to 1.1557.
Australian dollar and New Zealand rose strongly versus the U.S. currency to a 23-year high of 0.9345 and to 0.7738 respectively. The greenback tumbled against the Canadian dollar to an all-time low of 0.9419 as crude oil prices and gold rallied to a record high of 95.28 and multi-year high of 797.20 respectively. The U.S. Dollar Index declined to 76.465, the lowest since the index began in 1973.
Thursday will see the release of Australia’s trade balance and retail sales, U.K. manufacturing PMI and CBI distribution, U.S. PCE (core), jobless claims, ISM manufacturing and pending home sales. Investors are focusing on the Fed's preferred inflation gauge, core PCE excluding food and energy items which is expected to rise at a 1.8% annual rate in September, the same as August. Fed Chairman Ben S. Bernanke and several other policy makers have said their ‘comfort zone’ for the so-called core inflation is 1% to 2%.
***********************************************************
Market Review - 31/10/2007 22:26 GMT
Euro rallies to fresh record high of 1.4508 after Fed rate cut
The single currency retreated briefly after the widely expected 25 basis points interest rate cut by the Federal Reserve and then rallied to a fresh record high of 1.4508 on the rally in U.S. stocks.
The Federal Open Market Committee decided to lower its target for the federal funds rate by 25 basis points to 4.50%. The FOMC vote to cut Fed funds rates was 9-1, with Hoenig preferring no change. The FOMC statement indicated economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance, however, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Yesterday's interest rate cut combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets.
The greenback also retreated briefly versus the Japanese yen from intra-day high of 115.51 to around 114.88/90 after the interest rate decision and then rebounded later in the day due to renewed cross selling in jpy on the rally in U.S. stocks. Euro, aussie and sterling rallied against the Japanese yen to 167.28, 107.82 and 240.18 respectively. The British pound rose to a 26-year high of 2.0825 and the greenback weakened versus the Swiss franc to 1.1557.
Australian dollar and New Zealand rose strongly versus the U.S. currency to a 23-year high of 0.9345 and to 0.7738 respectively. The greenback tumbled against the Canadian dollar to an all-time low of 0.9419 as crude oil prices and gold rallied to a record high of 95.28 and multi-year high of 797.20 respectively. The U.S. Dollar Index declined to 76.465, the lowest since the index began in 1973.
Thursday will see the release of Australia’s trade balance and retail sales, U.K. manufacturing PMI and CBI distribution, U.S. PCE (core), jobless claims, ISM manufacturing and pending home sales. Investors are focusing on the Fed's preferred inflation gauge, core PCE excluding food and energy items which is expected to rise at a 1.8% annual rate in September, the same as August. Fed Chairman Ben S. Bernanke and several other policy makers have said their ‘comfort zone’ for the so-called core inflation is 1% to 2%.
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