On 29 July 2020, interest rates were unchanged by the decision of the U.S. Federal Reserve. This decision was in line with market expectations, which assumed that the corridor for the main interest rate would remain between 0.00 and 0.25 percent.
The decision-makers from the Fed confirmed their earlier position that they would continue to use the full range of tools available to support the US economy and counteract the negative economic impact of the coronavirus epidemic. However, the Fed notes that the epidemic continues to pose a significant threat to the economic prospects in the near future.
The Fed has confirmed that interest rates will remain close to zero until the economy moves closer to full employment and an adequate level of price stability is achieved. Policymakers also consider the current events to be deflationary in nature, which may further lengthen the low-interest rate period over time.
The US central bank has announced that it is extending until 31 March 2021 the maintenance of US dollar liquidity lines to other central banks in the world. This information meant that the US dollar would be available to everyone for at least six months, which could eventually weaken the US currency. The Fed added that it would maintain bond buy-back programs and loan and liquidity programs.
The EUR/USD exchange rate, due to the weakness of the USD, was at 1.1800 for a while. This morning, however, the euro seems to be slightly weakening, as investors are waiting for important data from the German and euro area economies. They may help to assess the extent of the economic recovery and whether it is sustainable. An initial estimate of the US GDP for the second quarter will also be published today. It is expected to fall by more than 30%, published at 2:30 pm.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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