USD – A Modest Recovery, Perhaps

The USD continued to trend slightly stronger versus the EUR and GBP on Tuesday as the marketplace became cautious across the board. Market participants largely waited for the FOMC to issue its statement late in the day and this had a rather negative effect on international equities as investors worldwide seemed to express sentiment that the Federal Reserve is essentially between a rock and a hard place. The Fed surprised no one when it said it would keep interest rates at historic lows and foresees the policy as long lasting. The Fed did announce some measures regarding the purchasing of debt, but this will be interpreted as a rather benign attempt to calm investors who fear that the U.S. economy is headed for a double dip recession. The Fed admitted that they believe that growth will slow down in the short term, but tried its best to keep an optimistic outlook.

Today the Trade Balance numbers will be presented by the States, but investors are likely to focus on the sentiment that will continue to resonate from the Fed Statement yesterday and its implications. Wall Street traded in negative territory most of Tuesday and could not muster much support. Tomorrow the weekly Unemployment Claims are on the calendar and Friday will see Retail Sales. These two reports could be a spur in the markets if they produce lackluster numbers. The Fed’s attempt last night to suggest that a ‘modest recovery’ is anticipated will do little to calm the rather strong questions that are mounting regarding job creation, consumer spending, and the inability to foster any momentum in the housing sector. The USD has had two rather stable days of trading against the EUR and GBP, but it may be too early to call this a renewed safe haven stance.

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