The U.S. dollar gained against the euro Wednesday after the Federal Reserve's Federal Open Market Committee left benchmark interest rates unchanged as expected and reaffirmed they will be low for some time. Overall, I would say the statement is broadly neutral, with hawkish and dovish elements. The Fed I would say is less pessimistic about prospects for the U.S. economy. Asian stock markets were mixed Thursday with little in way of cues from Wall Street or the U.S. Federal Reserve's policy statement. National Australia Bank's bid for AXA Asia Pacific Holdings was supporting the financial sector in Sydney, while Tokyo's Nikkei 225 was getting a lift from the weaker yen. Japan's Nikkei 225 was up 0.3%, Australia's S&P/ASX 20 was up 0.5%. Dow Jones Industrial Average futures were down 27 points.
USD & GBP
The dollar was steady against the yen on Thursday, holding firm just below the previous day's high hit after the Federal Reserve voiced some optimism about a stabilising economy. The dollar kept broad its strength, staying close to an over two-month high against the euro, after the Fed reminded markets that it will let most of its special liquidity facilities expire by early next year. There is an impression that the market for the weak dollar is coming to an end, especially after seeing a raft of better-than-expected economic data. But the greenback's gains were capped after the Fed also reaffirmed that interest rates would remain low for an extended period, as expected. There is an impression that the market for the weak dollar is coming to an end, especially after seeing a raft of better-than-expected economic data but it is probably too early to say the U.S. economy is on a path towards stable recovery, and I see dollar-selling remaining a dominant play into the first half of next year.
Sterling rose after a surprisingly strong UK employment report, and the Australian dollar fell after weak growth data suggested interest rates may stay put for now. Sterling rallied after figures showed the claimant count fell in November, the first decline in almost two years.
Euro & U.S Dollar
Concern about some parts of the euro zone banking sector and sovereign creditworthiness this week may have overshot, aiding the euro's rebound back toward $1.46. The euro's failure to test key support around $1.4480 prompted traders to take profits on short euro trades. Sentiment towards the euro remained sour after Standard & Poor's cut Greece's credit ratings by one notch on Wednesday, traders said, but the impact was largely contained after initial negative reactions to a downgrade by Fitch Ratings last week.
Australian Dollar & U.S Dollar
The Australian dollar was down at near $0.90 after Australia's gross domestic product grew by 0.2 percent in the third quarter, less than forecast, while dovish central bank remarks prompted investors to trim expectations for tightening next year.
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