Just when you thought it was safe to go back into European waters, the dollar fell nearly .5% against the Euro in the first hours following The Fed’s announcement to continue lending at an historical low. Only the still struggling economy could reverse a trend that saw the Euro hovering near a nine month low against the dollar just last week based on German consumer confidence numbers.
In addition to the suggestion that the recovery is still on shaky ground it puts my European holiday in jeopardy more than Inter Milan’s chances of stopping the rampant Chelsea Blues later today on their march towards the Champion’s League final early this summer in Rome. And I do so love Chelsea and Rome in early summer.
In typical Fed speak Bernanke read in his prepared statement, “The (Federal Open Market Committee) continues to anticipate that economic conditions — including low rates of resource utilization, subdued inflation trends, and stable inflation expectations — are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”
Mr. Bernanke couldn’t have surprised anyone less after the release of today’s housing numbers that simply reinforced the fragility of the US economy. Just a day after a plunge in consumer confidence the Obama Administration was hit with the lowest new home sale numbers since this number has been tracked going back over a half a century.
Predictably in early trading Wednesday the continued low cost cash available to business drove stocks up following a two day slide. The dollar, as mentioned dropped lifting commodity prices that resulted in a categoric rise in material and energy stocks.
With interest rates this low for the foreseeable future look for the dollar to continue to fall against the euro, making that European vacation less likely with the specter of looming inflation at home. Should make for a lovely summer.
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