The
dollar declined against the euro before as Federal Reserve end its
two-day meeting at which policy makers dacided to keep the target
lending rate at the lowest level in more than three years.
The Federal Reserve's Monetary Policy Committee has decided to
leave its Fund Rate unchanged at 2%, as widely expected, after their
monthly monetary policy meeting.
The Fed affirms that
easing of monetary policy plus measures to support market liquidity
should promote economic growth. Downside risks to growth, although
still present have diminished somewhat, while upside risks to inflation
have increased, the Bank reaffirms its commitment to “monitor economic
and financial developments and will act as needed to promote
sustainable economic growth and price stability.”
The
bank affirms that economic activity continues growing supported
partially by resilient household spending, although labour markets have
softened, and credit markets “remain under considerable stress.” The
bank warns about tighter credit conditions, the weakness of the housing
market, and higher energy prices. ``The
Fed fall short of the most hawkish of expectations,'' said Nick
Bennenbroek, head of currency research at Wells Fargo & Co. in New
York. ``The dollar will come under a little bit of pressure.''
Inflation
is expected to moderate later this year according to the Fed although,
having in account the high energy prices uncertainty about inflation
remains high.
New home sales fell to an annual pace
of 512,000 in May, from a revised 525,000 the prior month, the Commerce
Department reported today in Washington.
Orders for
durable goods excluding transportation items dropped 0.9 percent in May
after a revised 1.9 percent increase the prior month, the Commerce
Department also said. The median forecast of 38 economists surveyed byBloomberg News was for a decrease of 1 percent.
``Due
to the underlying growth concerns, it will be very difficult for the
Fed to hike rates this year,'' said Matthew Strauss, a currency
strategist atRBC Capital Markets in Toronto. ``That means the market
has gotten a little bit ahead of itself pricing in rate increases, and
the dollar will come under pressure.''