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Due to the Fed’s blurry statement, the market saw that the FOMC is not so enthusiastic about fighting inflation and once again, the greenback declined across the board.
The Fed missed a chance to shock the market with a rate hike this week, which would have damaged stocks but may have also wrecked the back of oil speculators by prop-up the dollar when building credit higher. Instead FOMC’s dawdling-over caused the worst of all worlds. Oil prices jump sharply breaking the $140/bbl handle, stocks nosedived as a result and the dollar continued to weaken both against the euro and yen.
Next week, what will happen to the dollar is quite interesting with its defensive position. The NFP report will be announced on Thursday due to the July 4th holiday same time as the post rate announcement news conference by the ECB. It might cause a big volatility in the pair.
If US employment situation gets worse then the market expects the outlook of Fed rate hikes will weaken even more. Therefore the combination of progressively worse US economic data along with endlessly limited ECB monetary policy may create even more disadvantage for the dollar in the days ahead.
12:28
Posted on Jun-30-2008
