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Forex · News · Forex ForecastsNEWS / Forex Forecasts |
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Daily review of the market.
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12:05 08/11/2004
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Daily review of the market.
American currency strengthened following the news about discount rate hike and the forward-going pace of economic expansion.
On Tuesday, the Federal Reserve System of the U.S. raised its target for the federal funds rate by 25 basis points, so that to limit negative effect produced by inflation.
By the FRS decision, discount rate that determines the cost of credit was raised to 1,50%. Discount rate was at its 46-years lowest of 1% in the last four years.
That is the second time the rate was raised by quarter of a basis point this year. Six weeks ago, the FRS raised rate target by 0,25%.
Decision to raise rate target was made despite July slow down in economic expansion and record prices for oil.
Rate hike was expected and forecasted by the majority of analysts, despite slow down in new jobs’ creation in the U.S., which was reported at the end of last week. 32 000 new jobs were created instead of the forecasted 228 000 jobs.
According to preliminary data, labor productivity in non-agricultural sphere rose by 2,9% in the second quarter of 2004. The given data was higher than expected by analysts that had looked for gain in 2%.
Nevertheless, labor productivity indicator came out the lowest since 2002, which concerns the market.
Preliminary unit value made up +1.9% in the U.S. in the second quarter.
Rise in unit value coupled with labor productivity growth can result in the necessity to raise basis interest rates, which is a positive factor for the rate of the dollar.
British currency failed to resist common European currency on the background of weaker than expected inflationary data, which makes aggressive policy of Britain in terms of raising discount rate less probable.
Official data, published yesterday, show that trade balance deficit made up 4.97 billion pounds in Britain in June against 4.83 billion pounds in May. According to the forecasts, the given indicator had to equal something like 4.6 billion pounds.
The forecast was created by trans1.
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