Dollar slid to its new historical bottom rate against euro hitting 1.4967 on EUR/USD. Missing the marvelous 1.5000 pint by about 30 pips, EUR/USD retraced by 150 points back as the Forex traders consolidated their profits on the rally. Another week without any supporting for dollar may probably break this resistance.
As it seems the CBOT futures contracts, showing a high probability decline of interest rates by 0.25% in December and 77% probability of decline to 4.0% in January 2008, were one of the reasons for the EUR/USD rally. Investors seek a safe harbor for their funds as the biggest world banks declare profits dropdowns and real estate sector recession rages. And the perfect safe harbor are the U.S. treasury bonds; they jumped up in price and at the same time their yeild is now on its 2-years minimum.
Fed stated that it doesn’t plant any rates cuts during its next meeting on this December; in it’s opinion they’ve done enough for the economy growth and it’s about time to start caring about inflation. But markets say otherwise. Is it because traders don’t know what FOMC knows, or is it the case when Fed looses its control over the situation? The answer to this question will dictate the financial markets behavior in the next several months.
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