The US Federal Reserve has shocked analysts by announcing its intention to hold interest rates until 2014 in light of perceived significant underlying risks to the US economic recovery, paving the way for currency traders to capitalise on a falling dollar.
The Federal Reserve has surprised analysts by announcing it intends to maintain the current level of US interest rates until 2014, sending the value of the dollar plummeting and causing market concern over the outlook for the US.
The world’s largest economy, the US has been on a sluggish growth trajectory out of recession, with unemployment still a significant political and economic issue affecting growth.
The news from the Federal Reserve was accompanied by vocal concerns about underlying insecurities in the US recovery, and has led some commentators to question how optimistic they should be towards US securities over the medium term.
Analysts had anticipated rates would rise in 2014, but previous expectations had been for an earlier rise in Q1 or Q2, in light of seemingly growing interest amongst Federal Reserve members to help fuel investment and contain inflation.
The threat of stagnant interest rates is feared to have an adverse effect on investment in US instruments and US bank deposits, as investors look to more optimistic rates elsewhere.
The falling dollar reflects the anticipation on the dollar being suppressed as investors switch their capital from a dollar denomination to a currency with a more imminent chance of growing returns. For CFD trading and those spread betting on the US currency, it seems that the possibility of trundling performance over the near future might result in better trading opportunities elsewhere.