RTTN: Dollar Attempting To Climb After Fed Announces QE3
(RTTNews) - The dollar is struggling to pick a direction immediately following the announcement that the Federal Reserve will implement a third round of quantitative easing. The announcement from the 2-day meeting of the FOMC came a short while ago and Chairman Ben Bernanke will be holding a press conference at 2:15 PM ET.
The Federal Reserve took drastic new steps to stimulate the sluggish U.S. economy on Thursday, offering to buy $40 billion of agency mortgage-backed securities each month, starting Friday.
In addition to embarking on a third round of quantitative easing, the Fed also extended its vow to keep interest rates at rock-bottom rates to mid-2015. Policy makers also decided to keep in place its Operation Twist program swapping short-term bonds for longer-term assets.
The debt-to-GDP ratio would be sustainable and fall at some point for both Spain and Italy, if the countries successfully achieve their fiscal consolidation targets, the European Central Bank said in its monthly bulletin released Thursday.
A key driver of the results was the assumption that the governments concerned will achieve structurally balanced budgets in the medium term, as prescribed by the Stability and Growth Pact, the bank said in the report.
Germany's IfW think tank downgraded its growth projection for both 2012 and 2013 due to weak domestic investment and slowing global growth. The Kiel-based institute forecasts the largest Eurozone economy to grow 0.8 percent this year, marginally below the prior estimate of 0.9 percent. The growth estimate for 2013 was downgraded to 1.1 percent from 1.7 percent.
The dollar initially jumped to a 1-day high of $1.2854 versus the Euro after the Fed announced QE3, but has since eased back to around $1.2890.
Investors in the U.K. expect inflation to remain more volatile than in the past, at least for the next few years, the latest edition of Quarterly Bulletin published by the Bank of England revealed Thursday. The report noted that investors' uncertainty about inflation rose substantially during the financial crisis, particularly between three and seven years ahead, and has remained high ever since.
"It is likely that this higher uncertainty reflects investors' beliefs that the volatility in inflation over the past five years will persist for at least the next few years," the report said.
The greenback also spiked to a high of $1.6068 versus the pound sterling after the QE3 announcement, but has since retreated back to around $1.6115.
The buck dropped to a 7-month low of Y77.121 versus the Japanese Yen Thursday morning, but has since bounced back to around Y77.585.
First-time claims for U.S. unemployment benefits rose by more than expected in the week ended September 8th, according to a report released by the Labor Department on Thursday, although the data was skewed by the impact of Hurricane Isaac.
The report showed that initial jobless claims rose to 382,000 from the previous week's revised figure of 367,000. Economists had been expecting jobless claims to edge up to 370,000 from the 365,000 originally reported for the previous week.
With energy prices showing a substantial rebound in the month of August, the Labor Department released a report on Thursday showing that U.S. producer prices rose by more than expected during the month.
The Labor Department said its producer price index surged up by 1.7 percent in August following a 0.3 percent increase in July. Economists had expected the index to increase by 1.4 percent.
