Tuesday August 10, 2010 - 20:29:25 GMT
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Fed Helps Equities Recover Earlier Losses
The news that the Fed is going to let the
economy work its way through the slow down helped equity markets regain some of
its earlier losses.
The Fedâ€™s decision to shift buying interest
out of mortgages and into Treasury Bonds is helping September T-Bonds and
T-notes to rally to new near term highs.
Both crude oil and gold also rallied on the
move by the Fed as short-covering rallies, driven by demand for higher risk
The Federal Open Market Committee left
interest rates unchanged as expected as well as a majority of its policy
statement from previous sessions.
The Dollar fell and stocks rose as the Fed
kept its balance sheet intact while changing the composition of said balance
sheet by moving out of mortgages and into long-term Treasuries.
The Fed also said that inflation is
â€śsubduedâ€ť without specifically mentioning any issues with deflation. It also
added that interest rates would remain low for â€śan extendedâ€ť period.
The FOMC vote was not unanimous, as Kansas
City Federal Bank President Thomas Hoenig once again remained the lone hawk.
The vote was not â€śbookendedâ€ť by any doves as some had anticipated.
The news weakened the Dollar by fueling
short-covering rallies in most major Forex markets
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