Surprise, surprise! The FED gives indication that another rate cut is just what the ailing US economy needs.
“The economic situation has become distinctly less favorable” since the summer, Bernanke testified. Since his previous such assessment last summer, the housing slump has worsened(AP) — Bernanke
Also, credit problems have intensified and the job market has deteriorated. Bernanke said the confluence of these factors has turned people and businesses alike toward a more cautious attitude toward spending and investment. This, he said, has further weakened the economy.
Worry not because The Fed “will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks.”
The Federal Reserve, which started lowering a key interest rate in September, has recently turned much more aggressive. Over the span of just eight days in January, it slashed rates by 1.25 percentage points — the biggest one-month reduction in a quarter century. Economists and Wall Street investors predict the Fed will cut rates again at its next meeting on March 18.
There are dangers that the economy will weaken even further. “The risks include the possibilities that the housing market or labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further,”
I think you get the point. The dollar is going to further depreciate against other currencies and precious metals such as gold and silver. In fact the EUR/USD pair is trading at 1.5125, the highest it has ever been! Gold is sitting at $960/oz and oil is trading at over $100/barrel.
I’m not worried though as I’m sitting on a nice long position on the EURO and have a nice chunk of the yellow metal in my BullionVault account. However, a large portion of my real estate development investments are denominated in USD, so I’m a bit worried from that perspective. For now, those of you who trade currencies like me should keep an eye on the EUR/USD. Enter on the retracements and enjoy the ride as this pair continues to test resitence level after resistance level.
Best of luck to you all! I hope you’re all able to weather this ‘financial storm” and even profit from it.
Cheers,
Alan