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Euro Gains Following Fed Announcement

Euro Gains Following Fed Announcement
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FOMC Statement From July 29 to July 30
Euro Hangs In The Balance As Fed Meeting Gets Underway

The euro gained some footing on Thursday morning and traded at $1.3613 after the US Federal Reserve's two day policy meeting concluded with the bank promising to keep interest rates low for the time being. The common currency had been on the decline this week as the Fed and the European Central bank moved in opposite directions.

The Fed is stuck in a difficult position. The US economy seems to be picking up, but a lackluster first quarter forced the bank to sharply lower its growth expectations for this year. For the past five years the US economic growth has been unable to meet the bank's projections, but unemployment has fallen faster than the bank predicted and inflation looks to be headed towards the bank's 2 percent target.

With all of that in mind, Fed Chair Janet Yellen and her colleagues must find the perfect moment to raise rates. If the interest rate is too low, many worry about inflationary pressure, but if the bank ups the rate too soon, the US' recovery could be thrown off course.

Related Link: Euro Steady As Fed Meeting Comes To A Close

Meanwhile the eurozone is facing a different set of problems as the region's fragile recovery seems to have sputtered out. Recent economic data from the bloc has shown only patchy improvements and inflation has been dangerously close to zero.

The European Central Bank (ECB) announced a stimulus plan at its June meeting which included lowering its interest rate and taking the deposit rate below zero. The bank is also planning a series of targeted loans to boost lending among the region's banks, but the loans aren't expected to become available until September.

Though the bank has asked for patience while the changes take effect, many have begun to question whether or not the region has actually exited its recession.

The eurozone is also grappling with renewed fear over terrorism in the region as fighting in the Middle East rages on. The Wall Street Journal reported that German officials warned that at least 2,000 Europeans, 320 of them German, traveled to the Middle East to join the Syrian civil war, and many are now returning to their home countries. Police in Berlin arrested a French-Algerian man over the weekend as he tried to return after fighting with Islamist militants in Syria.

Many are worried about the possibility of European citizens becoming radicalized without the government's knowledge.

Posted-In: European Central BankNews Eurozone Forex Global Federal Reserve Pre-Market Outlook Markets Best of Benzinga


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