Currency Exchange UK

 

US dollar retreats ahead of Fed Announcement

US dollar retreats ahead of Fed Announcement

Despite being already generally on a weak trend, the US dollar fell against a basket of currencies today as the market awaits the latest decision on the base interest rate from the US Federal Reserve.

The Fed has so far promised to keep interest rates low but traders are waiting for the official announcement.

The US base interest has been kept near zero for nearly a year now and it is widely believed that the Fed will stick to its promise to keep them low for an “extend period” of time. 

This decision has so far been stuck to despite the US economy showing distinct signs of recovery.  It is expected that the market will react as follows if the rates are kept as they are:

If rates are expected to stay low until at least the middle of next year, then stocks could get a boost.  This would cause the US dollar to face pressure to sell.  Essentially, this would mean a boost to the EUR/USD currency pair.

On Tuesday, the US dollar index showed its highest level since the beginning of October at 76.817 and in this morning’s early trading (London session) it had fallen by 0.3 per cent to 76.140.

Risk appetite in Europe has been spoiled thanks to poor results from European banks – traders headed for the dollar and yen on Tuesday in light of damaged confidence in the banking sector.