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Thursday, May 31, 2007

Forex Trading - FOMC Unimous About Keeping Rates Unchanged

Forex Trading - FOMC Unimous About Keeping Rates Unchanged. In forex trading yesterday, the Fed was torn between the inflation issue and housing. In the end they decided to keep rates unchanged.

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According to the minutes of their metting held on May 9, the Fed officials expect the economy to improve this year and they eye inflation as their main concern. They also list the the risk that the housing recession may ``weigh heavily'' on growth. The also said the risks of a slowdown have ``diminished slightly.''

``Recent developments were seen as supporting the Committee's view that maintaining the current target rate was likely to foster moderate economic growth and a gradual ebbing in core inflation,'' the minutes said.

The minutes of the Fed meeting on may 9 was the event that was widely expected by the forex markets yesterday, but it hardly move the market. The pound was up just 16 pips 1 hour after the report, and the euro was up just 10 pips.

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Forex News - US economy weakest in four years

Forex News for May 31 - The US economy grew at a pace of 0.6% in the first three months of 2007, its weakest rate in more than four years. This figure was a downward revision on the initial 1.3% estimate, and was also worse than market expectations of 0.8%.

It was the slowest rate of growth since the final three months of 2002.

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Significant reason for the weak numbers was the fall in the housing market, which posted a 15.4% reduction in new home building during the quarter.

Consumer spending remained resilient, adding 4.4%, and business investment was better than earlier estimates, growing 2.9%, revised up from 2%.

Some comments of the analysts incuded:

"It's quite obvious the economy bottomed in the first quarter and this leaves us with a better base from which to bounce back."

"I think we'll see second-quarter growth above 3% and 2.5% for all of 2007," said Lehman Brothers senior economist Drew Matus."

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