Market News

Following the release of the minutes of the Federal Open Market Committee (FOMC), which showed that the Federal Reserve has lowered its growth estimates for this year, the U.S. Dollar fell against both the Euro and the Yen. Minutes from the FOMC meeting of April 30, 2008 showed that the Fed has reduced its estimate of the gross domestic product for this year to a range between 0.3% and 1.2% from the original estimate of between 1.3% and 2%. The gross domestic product is an estimate of the value of goods and services generated in the United States. It is by far the best indicator of the strength of the economy.

Investors are anxiously waiting for the minutes from the April 29-30 meeting of the Federal Open Market Committee which will be released today to determine the future of the U.S. economy. As a result, the U.S. Dollar traded in narrow limits against major currencies. The U.S. Dollar continues to come under pressure against the Euro as investors now believe that the ECB will not cut interest rates in the near future. The Dollar also fell sharply against the Yen, as investors are concerned about the increasing oil prices which rose to a record high of $129 per barrel. According to analysts the U.S. Dollar will be greatly influenced by the information outlined in the minutes of the FOMC.

The Federal Open Market Committee will be meeting today to discuss interest rate policy issues. Investors are awaiting the outcome of this meeting which will give them an indication of the direction of the interest rates in the U.S. Consequently, the U.S. Dollar was steady against several major currencies in early morning trading in Sydney today.

Due to lack of latest economic data the U.S. Dollar remained steady against major currencies. The U.S. Producer Price Index data and the German ZEW survey will be released tomorrow, which will give investors some direction as to where the foreign exchange market is heading, but for now, all investors are on the side lines. More importantly, the data will provide investors with information regarding interest rates as they prepare for information from the next meeting of the European Central Bank and the U.S. Federal Reserve.

The U.S. Dollar fell slightly against the Euro in afternoon trade on Friday in Tokyo while choppy against the Yen. The U.S. Dollar fell against the Yen immediately following the Japanese government’s release of stronger than expected real Gross Domestic Product data for the first quarter ending March, but the drop was limited, as overseas fund managers and other investors came to its rescue.

In mid-morning trading on Thursday in Sydney, the U.S. Dollar traded higher versus major currencies because of the belief that efforts by the Federal Reserve Bank to stimulate the economy is working. This optimistic view of the economy lifted the Treasury yields, even though the Consumer Price Index for April shows that core inflation still persists, which confirms speculation that the Federal Reserve Bank will not cut interest rates in the near future.

Investors’ expectations of additional rate cuts are fading which helped the U.S. Dollar which traded mixed in Tokyo on Wednesday against major currencies. The expectations of additional rate cuts faded following comments by officials of the Federal Reserve about inflation pressures. Janet Yellen, President of the Federal Reserve Bank in San Francisco, California, said that the recent figure on inflation is “disappointing” and that the consumer inflation rate is too high, even if food and energy prices are excluded.

The Pound Sterling and the Euro remained soft against the U.S. Dollar, on the expectation that interest rate differentials will shift in the months ahead. A decline in business and consumer confidence, specifically manufacturing activity and retail sales growth, as evidenced by weak economic data, lead to the suggestion by analysts that the Euro zone will experience a significant slowdown in future growth rates.

In late morning trading on Friday in Sydney, the U.S. Dollar traded slightly weaker versus major currencies because traders are now convinced that the Federal Reserve will not raise interest rates to curb inflation. The U.S. currency came under pressure on continued concerns about the future of the U.S. economy, and the possibility that the European Central Bank will not cut interest rates any time soon.

Today the U.S. Dollar traded firmer versus major currencies, adding to gains made overnight on growing speculation that the interest rate cutting cycle by the Federal Reserve Bank may be coming to an end.

The European Commercial Bank will be meeting tomorrow, May 8, 2008 to decide on the interest rate level in the Euro zone, and as a result, the U.S. Dollar traded in a very narrow range against the Yen and the Euro in mid-day trading today in Asia.

Investors are still skeptical about the recovery of the U.S. economy and as a result, the U.S. Dollar traded slightly weaker against major currencies on Tuesday in Singapore. High oil prices elevated commodity currencies including the Canadian dollar. Despite better than expected results of the ISM Survey, covering U.S. services which jumped from 49.6 in March to 52.0 in April, the U.S. Dollar dipped.

The U.S. Dollar traded narrowly against major currencies in early Monday morning trading in Sydney. Financial markets in Japan were closed today due to a public holiday. On May 5, 2008 at 00:45 GMT, the U.S. Dollar traded at 105.40 Yen, compared to 105.39 Yen, while the Euro traded at $1.5447 compared to $1.5424 in late Friday trading in New York.

The U.S. Dollar remained steady against major currencies following a 5-week high versus the Euro overnight, on speculation that the Federal Reserve will end its rate cuts soon.

Starting today, the Federal Reserve will have a two day policy meeting during which a decision will be made regarding the direction of interest rates, i.e. whether or not to cut them. Some investors anticipate that the Federal Reserve will reduce interest rates by 25 basis points.