US Dollar Gains Despite Bernanke’s Signals That the Fed Will Cut Rates
US Dollar Gains Despite Bernanke’s Signals That the Fed Will Cut Rates
During a speech to the National Association for Business Economics this afternoon, Federal Reserve Chairman Ben Bernanke opened the door to rate cuts at their next meeting on October 29. In his comments, Mr. Bernanke said that inflation is likely to ease, and “the combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased. At the same time, the outlook for inflation has improved somewhat, though it remains uncertain. In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate.”
Fed fund futures continue to fully price in a 50bp cut, and a 30 percent chance of a 75bp cut, so why has the US dollar rallied against currencies like the euro and British pound, while risky assets like USD/JPY and stocks have fallen back? Traders remain on edge due to speculation over what will happen on Wednesday, when the SEC’s ban on short-selling of financial stocks will expire. Indeed, financial stocks are leading this afternoon’s equity market decline, as those that tried to get a deal and bought shares are now getting out before today’s close. This leaves risk aversion in play, which tends to benefit the Japanese yen the most in the forex markets, though the US dollar tends to rise as well on demand for US Treasuries.
DailyFX
Disclaimer
Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Comments
No comments yet.
Sorry, the comment form is closed at this time.