Forex Blog | U.S. Fed cuts interests rates 50 basis points to 1%. Dollar falls today in forex trading. | CountingPips Forex Blog

October 29, 2008 - Forex Economic News

U.S. Fed cuts interests rates 50 basis points to 1%. Dollar falls today in forex trading.

The U.S. Federal Open Market Committee concluded its monetary policy meeting by cutting its benchmark interest rate by 50 basis points today. Today's rate cut comes after the Fed had previously lowered the interest rate by 50 basis points on October 8th in coordination with other major central banks. The surprise October 8th rate was in concert with Canada, China, England, Switzerland, Sweden and the European Union in effort to ease turmoil from the credit crisis and a surge in declining global stock exchanges. The rate reduction today USD falls in forex trading was widely anticipated by the market with forecasts expecting the 50 basis point cut as the unanimous(10-0) decision by the committee brought the interest rate down to its lowest level since 2004.

The Fed statement accompanying the rate decision commented on the obstacles facing the economy, "The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures. Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit."

The statement also said that inflation is on the back burner now that energy prices have decreased and that the recent government steps including the credit rescue package "should help over time to improve credit conditions and promote a return to moderate economic growth."

Today's rate decision will be followed by the advance U.S. Gross Domestic Product release tomorrow. Economic forecasts are expecting a 0.5 percent decrease for the third quarter after the second quarter GDP advanced by 2.8 percent. Read the Fed interest rate statement here.

US Durable Goods unexpectedly rose in September.

Durable goods orders in the United States unexpectedly rose in September following a deep decline in August according to a separate news release by the U.S. Commerce Department earlier today. September's new orders for durable goods rose by 0.8 percent and posted a $1.6 billion increase in new orders to a total of $207.8 billion. The September increase follows a decrease of 5.5 percent in August and is the fourth month out of the last five that durable goods have increased. Market expectations had forecasted that durable goods orders would drop by 1.1 percent for the month. New orders for durable goods excluding transportation fell by 1.1 percent in September but still beat market expectations that were predicting a decrease of 1.5 percent. Durable goods are products manufactured in the U.S. and considered to last more than three years.

September results for shipments of durable goods increased by 0.4 percent or $0.4 billion while unfilled orders increased by 0.4 percent($3.0 billion) in the month and durable good inventories also increased by 0.4 percent($1.2 billion). Nondefense orders for new goods rose by 0.8 percent while defense orders for goods increased by 19.6 percent in September.

Forex - US Dollar falls in trading against most majors, rises vs. yen.

The U.S. dollar has lost ground against the euro, pound, aussie, kiwi, loonie and the Swiss franc for a second day in a row in the forex market today while gaining against the Japanese yen for a second day. The euro has increased from today's opening of approximately 1.2716 dollars per euro to trading at 1.2953 near the end of the US trading session at 4:28pm ET. The British pound has also gained from today's opening exchange rate of 1.6015 dollars per pound to trading at approximately 1.6321. Also gaining ground verses the dollar today is the Swiss franc at 1.1322, the aussie dollar at 0.6653, the kiwi dollar at 0.5850 and the Canadian loonie at 1.2284. The U.S. dollar has gained for a second straight day today against the Japanese yen. The USD/JPY has gained from its 96.64 opening exchange rate to trading near the end of the U.S. session at 97.04 yen per dollar.

USD/CAD Chart - The US Dollar declining today against the Canadian Loonie(Daily Chart).

Today's Forex Chart

tags: interest rates, durable goods, forex trading, forex blog

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