Forex online trading experts are witnessing the return of QE, now in its third version, as the Fed announced a new round of bond-buying.
The Federal Reserve opened a new chapter Thursday in its efforts to stimulate the economy, intending to buy large quantities of mortgage bonds, and potentially other assets, until the job market improves substantially.
Citing high and stubborn levels of unemployment and hinting further action if the economy was not strong enough to revive the labor market, the Fed said the latest round would be open-ended monthly purchases of mortgage-backed securities which, together with continuing measures, are hoping to inject $85bn a month to the economy.
The Fed also said interest rates would stay at “exceptionally low levels” until at least the middle of 2015, and only tightening them when economic recovery was well established, as expected by forex online trading analysis.
Marketwise, the dollar fell to a four-month low against the euro. “The fact that the Fed has instated an open-ended purchase of assets is driving risk appetite”, said Charles St Arnaud, foreign exchange strategist at Nomura Holdings Inc., in New York. “QE is negative for the local currency, which is why we are seeing the dollar weaker across the board”.
The dollar fell 1.1 percent to $1.3137 per euro at 12:10 pm NY time, after touching $1.3169, the weakest level since May 4.
As forex online trading brokers are commenting, the need for stimulus reflects the disappointing condition of the American economy, which continues to struggle between crisis and prosperity three years after the official end of recession.
Currently, more than 20 million Americans cannot find full-time jobs and median household income has declined, while the housing market continues to be depressed.
The concern about unemployment also reflects an important shift in the priorities if the nation’s central bank, which has long focused on inflation. Inflation is now running below the Fed´s 2 percent annual target, but with the unemployment rate above 8 percent, the Fed’s policy-making committee suggested that a period of a slightly higher inflation can be tolerated, promising to maintain stimulus efforts “for a considerable time after the economic recovery strengthens.
In Europe, forex online trading news come from the two-day meeting in Cyprus to discuss the next steps regarding the region’s sovereign-debt crisis.
The common currency’s 14-day relative strength index climbed to 78.63, its fourth straight daily increase, after exceeding 70 on September 11.