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EUR/USD Fluctuates on Reports from US & FOMC Statement

December 14, 2010 by

EUR/USD jumped today in the first half of today’s trading session on speculation that the Federal Reserve is going to expand its bonds purchasing program, but later the currency pair dropped as reports from the US bolstered the dollar. Today virtually all reports were favorable for the US currency. The Fed didn’t changed its plans for bonds buying, but said that it “will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability”, so an increase of debt purchasing isn’t out of question. EUR/USD trades currently near 1.3409.

PPI rose 0.8% in November, seasonally adjusted, while an increase by 0.6% was expected. This increase followed a 0.4% advance in both October and September.

Retails sales also expanded by 0.8% in November, compared to the predicted 0.6% growth. The September to October 2010 percent change was revised from 1.2% to 1.7% .

US business inventories rose 0.7% from September to October, following a 1.3% advance (revised from 0.9%) in September. The forecast value was 0.9% growth.

The Federal Open Market Committee kept interest rates today at zero to 0.25 percent as was expected by market participants. The FOMC said in its statement that “although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow”. The Committee also said about its bonds purchasing plan:

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.

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