The Dollar fell for a second day in a row against the Euro after the Federal Reserve re-stated its pledge to hold the benchmark interest rate near zero for an “extensive period”. Moreover, the Fed downgraded its outlook for the U.S economy in noting areas of weakness in different sectors and stating that financial conditions “have become less supportive of economic growth” mostly due to the Euro Zone debt crisis.
Later today, the U.S Department of Labor will release the number of Unemployment Claims. After another disappointing figure was released last week, with jobless claims increasing to 472K – a small drop to 461K is expected this week.
The Pound extended its rally against the Dollar to hit a six week high, as the Fed’s decision to hold interest rates near zero for an “extensive period” pulled on the Dollar. The pair’s rise can also be attributed to a possibility of an early than expected rate rise in Britain as the Bank of England is reportedly divided on when to raise the rates. Yesterday, the BOE’s most recent policy meeting showed that one committee member voted to increase the rate from 0.5% to 0.75%.
The Australian Dollar rose to a high of $0.8771, from $0.8751, after news broke that the ruling Labor Party had elected Julia Gillard to replace the current Prime Minister Kevin Rudd. Rudd’s popularity took a turn for the worse after he was criticized for imposing a 40% tax on mining profits. However, Julia Gillard announced this morning that she was “throwing open the government’s door” to renegotiate with the mining industry, rousing hopes that the government would compromise on the controversial levy that has unsettled foreign investors.
Written by Finexo.com