Federal Reserve Loosens Rates for Banks

Federal Reserve of the United States of America lowered its primary credit rate (at which money to the banks are borrowed) from 6.25% to 5.75% to add liquidity to financial and lending markets. Federal Reserve (as the today's FOMC statement says) is concerned with the current situation of the economy growth and the crisis in the credit sector. FOMC also approved that there risks of growth slowing increased appreciably. Here is the Federal Reserve's press release concerning the bank rates:

To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points. The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York and San Francisco.

This suggests some more cautiousness to Forex traders, especially long-term ones. While the short-term traders may reap some profits from the fast moving markets, long-term traders might need to revise their recent strategies.

EUR/USD To Break Above 1.3850?

After the Federal Open Market Committee released its statement yesterday EUR/USD remained on its positions until today's early European session, which brought Euro to a rally behind the crucial 1.3800 mark. Will EUR/USD stay above it? Probably. Will EUR/USD break the 1.3850 resistance barrier to soar high to 1.4000 level? Less probably. Let's look on the fundamentals.
Yesterday a labor productivity data for the industrial sector came out lower than expected by the majority of traders - 1.8% increase, instead of 2.1%. Meanwhile, consumer credit for June this year increased by 13.2 billion dollars, while analysts were expecting 6 billion dollars increase.
FOMC released another 'inflation-concerned' statement, leaving the interest rates at 5.25% level. While the main concern for the FOMC remains the inflation, it started to get nervous because of the risks connected with the economical growth and especially housing crisis.
Today data on business wholesale inventories came out slightly better than predicted - increased by 0.5% instead of 0.4%, while the crude oil inventories again dropped down significantly - by 4.1 million barrels.
Despite of FOMC being more inflation orientated, the economical growth correction will probably make them to decrease the interest rates at least once (or at least stop increasing it even more). Currently, housing data and oil inventories (taking in mind current oil prices) don't look very promising for the U.S.

Key Fundamental Forex Data from U.S.

A rich day for the economical news releases from United States was today.
First, the weekly initial jobless claims data came out at the better than expected level showing only 301,000 claims for the previous week which signals the continued moderation of the U.S. unemployment rate.
Second, the leading indicators came out unexpectedly low at -0.3%, while analysts were expecting a growth of 0.1%.
Third, Philadelphia Federal Reserve manufacturing index came out at 9.2 - nearly a half of the expected 14.0.
And, at last, today's main news maker - FOMC minutes for the June 27-28 meeting were released today. The main idea of the minutes is that while the in the first quarter of 2007 economy grew at a slightly slowed down pace, the second quarter is more promising with the good news on industrial production and employment indicators; still the main concern for the Committee remain the inflation risks, while the GDP growth is estimated to be rather high in the rest of 2007.

Some Important Data from U.S.

Today some important macroeconomic data came out in United States - final data on GDP and final chain deflator for the first quarter of the 2007. Though this data is very important for Forex markets its neutrality prevented any large affect on the market. GDP came out inside the expected borders - 0.7% which is by 0.1% better than previous value. Chain deflator was slightly higher than expected - 4.2% against 4.0%. Today data on initial jobless claims were also released - 313,000 against 315,00 expected - not much surprise here too. FOMC policy statement will be released today - maybe there will be something in it, that will move Forex market out if its flat condition.

Euro Rallies as the Fundamentals Are Not In Dollar's Favor

EUR/USD today on Forex rallied high to 1.3380 level as the fundamental indicators from U.S. came below expectations. First, May Core CPI came at 0.1% level, whereas expected value was 0.2% (though, overall CPI was 0.1% higher than expected). Then, Industrial Production showed completely no increase in May which can be very for the U.S. GDP. Industrial Capacity Utilization was also lower than expected - 81.3% against 81.6%. And at last - Michigan University Consumer Sentiments Index (preliminary) decreased in May to 83.7, whereas experts expected 88.0. Such a bad day for the U.S. macroeconomics can be a sign to FOMC, which might start considering interest rates lowering.

EUR/USD Bearish after Fundamental News

EUR/USD broke through 1.3400 today on Forex market - showing a new 7-week low. Good macroeconomic data from U.S. was the reason for this break-through. Nonfarm payrolls - a major employment indicator of the U.S. economy - increased by 157,000 in May (22 thousands more than expected), while ISM Index - reported an increase by 0.3% up to 55.0% (against 54.0% expected). ISM Index means a lot in the U.S. economy because it describes its most powerful industries, and greatly influences FOMC rate decisions. Now it is quite possible to see an increase in U.S. interest rates by 0.25% this Fall, in my opinion.

FOMC Minutes to Support Dollar?

FOMC (Federal Open Market Committee) released its May 9 meeting Minutes on Wednesday, May 30. As it has been known since May 9 the conclusion of the meeting states that the inflation remains the main concern for the FOMC, while in future FOMC will outlook both inflation and economic growth. Statements presented in the released Minutes generally support this conclusion giving some more power for the USD bulls. This could be seen yesterday on Forex market when EUR/USD hit its new low since April 11 at 1.3406.

EUR/USD Reaches 1 Month Low

EUR/USD reached its one month minimum level today during a fast dollar rally that has been influenced strongly by the yesterday's FOMC statements. Is it a bull trend break, or just a small correction before the new heights? The answer will lie in the next 2 weeks - the next one can be ranging, while the second - bearish, which will show Forex traders a new medium term trend for EUR/USD, bullish weeks will probably return EUR/USD back to bulls.

EUR/USD Ranging before FOMC Meeting Today

After retreating back down to under 1.3550 yesterday, EUR/USD is now slightly ranging while waiting for the FOMC statement (today, 19:15 GMT) - one of the most important and anticipated fundamental events in the Forex trading community. There is almost no doubt that the interest rates will be left intact (5.25% currently). But there are many speculations about what FOMC will say about U.S. economics, inflation expectations and its regulatory policy. Strong positive expectations from FOMC can empower USD for the new bullish trend, while weak or unsure statements made by FOMC may be used by the EUR bulls for the new EUR/USD long positions.