The greenback could gain some of its loses across the broad after Fed announcement to provide greater support to mortgage lending purchasing up to an additional $750 billions of agency mortgage-backed securities to bring the total of its purchases of them to $1.25 trillion this year and to increase its purchases of agency debt this year up to $100 billion to be totally $200b and to improve conditions in the private credit markets, the Committee decided too to purchase up to $300 billion of longer-term Treasury securities in the next six months. The greenback came under strong pressure after this announcement which came accompanied with dovish growth outlook expected by the fed and underestimation of the inflation upside risks outlook because of the credit crisis and the recession pressure which is expected to continue longer than expected.

The fed action was expected to be taken later this year not immediately as what has happened in this week meeting.

The market has finally read the quantitive easing policy pressure on the greenback and how it can dampen its value as we have recently mentioned the gold could get above 930$ directly after the data and it is now trying for breaking 960$ as the quantitive easing policy can increase the budget deficit and threat the creditability and the trust in the US treasuries increasing the pressure on the greenback across the broad especially versus the single currency as the Europeans are looking conservative in adopting such policies comparing with US and the gold which can get benefits from the new supplied ample of funds.

The 10 years treasury yields was negatively impacted by Fed's decision to inject more funds in forms of buying bad mortgages loans which caused the problem and long term US treasury for providing funds to the governmental stimulating plans in another step of its quantitive easing policy to spur investment for finding a closer recovery point as what has been read from Bernenke's testimony recently that the will of change is very important to get out from this crisis soon and he is looking working for this with no delay. These treasuries can lose also the trust it has in the time of taking safe haven positions comparing with the gold attractiveness which is still trying to break 960$

There is no key data today to move the forex market and it is expected to be left to the equity markets movements.

Best wishes

FX Consultant

Walid Salah El Din

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