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EUR/USD Beats Weekly High on Fed Optimism

November 4, 2009 by

EUR/USD showed the biggest daily growth since early September today and reached a new weekly high as the Federal reserve released a very optimistic monetary policy statement, citing faster recovery and lower inflation, which still allows interest rates as low as they are now. Although the amount of planned purchase of the debt was decreased, the news didn’t reduce the market optimism substantially. The better unemployment report and rising stock markets also helped the euro to rise against the U.S. dollar. EUR/USD is currently trading near 1.4835.

ADP unemployment rate showed a decrease by 203k job places in October in U.S. This number was much better than the previous month’s decline by 227k (revised positively from 254k drop) and only slightly above the expected -198k change.

ISM services index decreased from 50.9% to 50.6% in October, while the growth to 51.5% was expected by the traders and investors.

Crude oil inventories decreased by 4 million barrels last week and now are near the upper limit of the average range for this time of year. Total motor oil gasoline inventories dropped by 0.3 million barrels during that week.

FOMC released its monetary policy statement today, which was filled with the high level of optimism. They left the interest rate unchanged between 0% and 0.25% (which was expected by the Forex traders), but decreased the purchase of agency dept from $200 billion to $175 billion, which caused a rather sharp spike on EUR/USD:

…the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt.

Yesterday, a report on September factory orders showed a growth by 0.9%, which compares to 0.8% decline in August and is slightly above the median forecast by the market analysts, which stood at 0.8% gain.

If you have any comments on the recent EUR/USD action, please, reply using the form below.

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