Wednesday, 23 Jun 2010

Euro/Dollar Rallies After Fed Statement

The EUR/USD cross climbed above $1.23 Wednesday after the Federal Reserve kept short-term Interest Rates at a record low, but downgraded its outlook on the U.S. economy.

The EUR was recently trading at $1.2324, while the U.S dollar weakened, reflecting traders' concerns that low borrowing costs and shaky U.S. growth bode ill for long-term strength in the Dollar. The market's biggest lift came after the EUR broke above $1.23, hitting an intraday high at $1.2327 about 15 minutes after the statement's release. Meanwhile the greenback slid against its major counterparts, the GBP and Yen. The U.S. Dollar Index, which tracks the U.S. currency against a basket of six others, also slid 0.5%. With the U.S. unemployment rate expected to remain high and inflation low for some time, the central bank said it expects the benchmark Fed funds rate it uses to steer the economy to remain near zero for an extended period. That could mean the rate staying at a record low until next year and a continuation of a bearish sentiment for the U.S dollar.