FOMC and Expectation

Daily Forex Fundamentals | Written by Crown Forex | Aug 05 08 07:34 GMT |
Major Market Mover: FOMC and Expectation

Clotting together and that's what the feds needed at the mean time, after the worst Credit Crisis since the great depression, the feds are tumbling in the middle and this time an insider conflict is taking place between policy makers some with an extreme hawkish stance and other still concerned about the downside risk to growth.

Steady is most likely what the decision will be today, holding rates at 2.00% believing that those levels are the most suitable rates in order to handle the slump that is acting on the housing market in addition to the credit crisis taking place in financial markets.

Though growth picked up in the second quarter from the revised 0.9% to 1.9%, on a higher spending due to the rebates that was distributed in late April into June, giving US citizens more cash to spend just to revive the money movement in the States, but what came to make the situation worse is the increasing risk to price stability, resulting to a dispute between policy makers.


The PCE excluding food and energy inclined to 0.3% from the previous 0.2%, presenting that inflation in the states is rallying up and needing some action in order to be contained, the surging oil and food prices along with low dollar prices had its affect in the spur of those inflationary levels. A rate hike is needed but when is the right time is the question??? Markets are waiting for some hints from Mr. Bernanke, to see if a rate hike would be taking place till the end of the year or not.

Yet markets are waiting for Mr. Bernanke to see what he will add in his statement, if inflation was remarked clearly in the report, markets participants will understand a rate hike will be taken as soon as October, just to restrain the rising consumer prices that are creating more fears to the Americans.

Nevertheless, lower demand on commodities is finally easing oil prices down, giving a break to markets participants and policy makers to just think what are the right steps to be taken; low oil prices means inflation is going to ease up especially in August, taking gasoline prices from the all time high levels that were recorded which is deteriorating the overall personal income.

The three committee members are undermining the effect of a rate hike; as if it was taken really the situation would worsen, because boosting the dollar form a hike would along with rising commodity prices would create lot of instability, with exports getting curbed from high dollar as we all have been noticing that the high exports levels in the past period was the main driver to the reasonably fair growth levels, and an aid made by the feds again by the fiscal policy would continue to widen the treasury deficit giving the government less space to spend more just to keep the economy ongoing.

Moving to the ISM Non-Manufacturing; investors are still unwilling to invest in the services in the United States and a reading falling in contraction 48.7 is what markets expects later today, the non stopping uncertainties along with the feds hard work to restore back confidence did not help yet.

With attention heading toward inflation, the US dollar was boosted against the Euro, pushing it to trade at 1.5520 levels; markets believe that a rate hike is needed before the end of the year but is that really the suitable decision to be taken or not???

My reader don’t expect much of Mr. Bernanke today, because high expectations will be let down of a extreme hawkish statement, growth is still taken into consideration and the downside revision taking place to growth reading are still concerning the feds

Crown Forex

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