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FOMC Statement Could Help Or Hurt USD |
| | | There wasn't a ton of overt optimism in the statement of the Federal Open Market Committee, but there were at least a couple rays of sunshine. The Fed voted to keep rates unchanged today. 
To learn more about what it means when the Fed raises rates, be sure to read Understanding the Fed Funds Rate versus the Discount Rate.
The announcement included language like "contraction appears to be somewhat slower" and "resumption of sustainable economic growth."
We also got insight into the Fed's outlook on inflation, which should be a big boost to demand for US bonds. That would help the USD. So would the purchase of mortgage-backed securities by the Fed.
But despite the optimism for the US economy and US stocks, this sunshine from Bernanke et al may actually hurt the USD.
As the world's so-called "safe haven" investment, the USD has actually gained some strength against other investing instruments in this world-wide economic slump.
When we see signs of optimism in other markets, often that's a cue for investors to jump into instruments that offer higher potential yields, but have been considered too risky over the past two quarters.
Following the announcement, yields climbed, bond prices dropped, the USD was mixed against the majors (but mostly down) while US equities were way up. Another example you shouldn't trade the news!
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