Fed Said More Stimuli Are Possible | IFCM
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Fed Said More Stimuli Are Possible - 3.11.2011

US Dollar The dollar fell against its major counterparts yesterday, erasing partly its previous gains after the Federal Reserve Chairman Ben Bernanke said the prospect of additional stimulus “remains on the table,” boosting speculation the bank may consider another round of quantitative easing. Despite the economic growth recovered somewhat, there are still “significant downside risks” and unemployment “far too high.” Keeping the target federal funds rate at the range of 0%-0.25%, the Federal Open Market Committee also revised its growth forecast for the next year to the downside and predicted that unemployment rate will stay between 8.5% and 8.7% by the end of 2012, compared with the previous forecast of 7.8%-8.2%. However, Bernanke added that “we still expect that economic activity and labor market conditions will improve gradually over time, the pace of progress is likely to be frustratingly slow.” Today the Institute for Supply Management’s non-manufacturing index may rise to 53.5 in October from 53 in September, according to preliminary estimations. The greenback extended gains in Asian trading hours today, especially against the Australian and Canadian dollars and the British pound, but weakened against the Japanese yen and was almost flat against the euro and swissie. Euro As the dollar’s growth was undermined yesterday by expectations that the US central bank may inject more money in the economy, the euro managed to strengthen against the US currency after touching a three-week low 1.3607. The single currency however is likely to remain under pressure as European leaders said Greece will vote next month to determine whether the people agree to receive international aid, after the country’s Prime Minister Papandreou “surprisingly” proposed to hold a referendum. By the end of the Asian trading session today the euro was close to the level 1.37 against the dollar. French President Nicolas Sarkozy in its turn said that Greece won’t receive a “single cent” in aid without holding to the terms of its bailout agreement so that the next 8 billion-euro bailout package was frozen. German Chancellor Angela Merkel defined that the vote will be “nothing less than the question: does Greece want to stay in the euro, yes or no?” Today in Cannes starts the summit of the Group of 20 leaders and the main issue will probably be the debt crisis and possible way to prevent its expansion. Moreover the European Central Bank meets today for the first time under the presidency of Mario Draghi to determine the policy interest rate, which is expected to stay at 1.5%, while Draghi will hold a press conference after the meeting.
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