After the impressive rally the dollar in the last trading days of last week, it has now fallen an average of 0.5% against all other major currencies.
Again, the unexpectedness of the Forex market has been shown for all to see. It’s never easy to predict how the market will behave. It depends on so many factors.
As you may recall, the Dollar rose after positive employment data and speculation of an impending interest rate hike.
Yesterday it all changed as Federal Reserve Chairman Ben Bernanke gave out a speech in which he more or less made it clear that there are no interest rate hikes coming in the near future.
Bernanke did say that the American economy was improving (which may be just something that he’s supposed to be saying) but that this improvement is far from stable. He also added that unemployment could remain high for some time (it’s currently at 10%) and that the reality of low interest rates is likely to continue.
After hearing this speech, the chances of an interest rate hike in June, which rose to over 50% according to various analysts, crashed. It’s pretty clear that the FED is looking for a more sustainable, long lasting, economic improvement before they increase interest rates. Just one month’s worth of jobs data is not enough to allay their worries about the economy.
The dollar may be headed, once more, for that long term slump that I’ve posted about on a recent post.
