Tuesday, 10 Aug 2010

US Dollar Slips After Fed Decision

The USD lost some ground against its major counterparts Tuesday after the Federal Reserve left interest rates unchanged, and renewed its pledge to keep them low for an extended period. The USD is currently trading lower against the EUR by nearly 80 pips at 1.3195. It is also trading lower against the GBP and JPY.

As expected, the Fed kept its target for its federal funds rate set at a range of zero to 0.25%. The decision to reinvest mortgage bond proceeds, an effort to keep market-set borrowing costs down, represents a significant policy shift for a central bank that just a few months ago had been avidly debating an exit strategy from the extraordinary stimulus delivered during the financial crisis.

Tomorrow, in a day that forex traders cannot afford to overlook, a batch of data is expected from the leading economies. Both the US Trade Balance and Crude Oil Inventories will be released on the same day, promising an extremely volatile trading day. Traders should take advantage of this unique opportunity and use the volatile market in order to capitalize profits.