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Dollar Stronger Before FOMC Decision, Gave Up Somewhat After

August 5, 2008 by

EUR/USD had a very big drop today as the stock markets grew in U.S. and the Forex traders expected positive decision from the FOMC monetary policy. ISM report also supported the greenback today with an increase in its index, but the main news was the interest rate decision and (more important) the statement released by the Federal Reserve. After the release of the report, dollar began to go down slightly, but overall it had a very good day against the euro today. EUR/USD went down from 1.5570 to 1.5446 today — the lowest since June 16.

FOMC left the federal funds rate unchanged at 2.00% today. The statement said that the economic situation improves but the employment, housing and financial sectors are still at risk. Nevertheless, inflation uncertainty remains a significant concern for the Federal Reserve. This will probably mean that there will be no further rate cuts or increases during the next meeting or two.

Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the Committee. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

ISM non-manufacturing index rose from 48.2% to 49.5% in July — this growth exceeds the median experts’ estimate by 0.8%.

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