Dollar Falls on GDP Disappointment, Fed Statement

The dollar fell following the release of weaker-than-expected GDP for the first quarter of the year and the Fed’s commitment to continuing its low interest rate policy. The euro rose above $1.4807 versus the dollar, up 0.2 percent after the data, from $1.4789 just before.

Yesterday, the Fed announced that it would continue to limit the Federal Funds benchmark interest rate at 0.25 percent and would maintain the policy for an “extended” period. The strong message removed any thoughts the markets may have had that US interest rates could increase later this year.

Contrasting the Fed’s position, the European Central Bank raised rates a quarter point last month and further rate hikes are likely. This could result in an increased demand for the euro at the expense of the dollar.

Source: Reuters

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