Investorz not sure how to react on Fed Rate Cut
More than a week after America’s Federal Reserve Bank slashed its benchmark interest rate to the historic (low) level of .25%, investorz are still struggling to assess the implications. The immediate reaction obviously was positive, as Central Banks around the world (namely Hong Kong and Japan) quickly followed suit, and stocks rallied just as expected. In other words, investorz were lifted up by the belief that Central Banks can and will employ all available financial tools to maintain acceptable liquidity in financial markets and to prevent the economic downturn from turning into a depression (Also came up in my post about “Helicopter Ben“) On the other hand, forex traders were understandably dismayed by the growing gap between US and foreign interest rates, as well as the inflationary implications of the Fed’s plan to essentially print money and inject it directly into the economy. The Associated Press reports:
“While there was applause for the (Fed) cuts…investors are now standing back and reflecting further on what that means,” said…an analyst. “Some nervousness has been expressed in the currency markets. We have seen a weakened dollar, which has probably had an effect on the markets across the board.”
Post Details
Posted on December 26, 2008
at 11:58 am
Written / posted by: John
Filed under: Credit Crisis, Currency Trading, forex trading