Dollar Fell As Federal Data Keeps Fed Bond-Buying Program Going
For the first time in over 6 weeks, the dollar fell against the Euro, when recent U.S. data about the economy spurred the Fed into motion and they made the decision to continue their bond-buying program with the same fervor as before. Many Americans made the decision to take their profits off of the recent gains in the markets and the dollar after seeing the weaker economic data for February and the beginning of March.
Economic Data Encouraged Fed To Continue-Bond Buying Program
Even though there were many positives in recent U.S. economic data, such as the slightly lower unemployment late, and the creation of many new jobs. There is other data that indicated Americans are struggling against inflation of consumer prices in February. This also precipitated a more subdued consumer confidence in early March. Three quarters of the spike in prices are related to gasoline prices, which will allow the Fed to continue on with their bond-buying program. This is discouraging to many investors who had seen the better employment data and had chosen to invest in the dollar thinking quantitative easing would eventually start backing off.
Fed Meets Next Week To Continue Bond-Buying Program
The Federal Reserve is scheduled to meet next week to further discuss the bond-buying program of $85 billion a month in mortgage and Treasury bonds, aimed at encouraging investment and bolstering a weak economic recovery. The bond-buying program is purposefully aimed at keeping long-term interest rates low, which in turn is eroding the dollar’s purchasing power little by little.
In many ways the Federal Reserve is like a circus act on the tight rope. They are trying to maintain the delicate balance of stimulating the economy, without teetering too far one direction and upsetting the overall balance. The problem is, one can only print money for so long without falling off the tight rope. And unfortunately, our nation’s tight rope act no longer has its safety net (the gold standard). In all likelihood they will be able to maintain the act for some time longer, which should spark a continued interest in the stock market and other high yield dollar based investments. Yet, as an investor it’s good to balance your own individual investment tight rope with a portfolio that is designed to weather all kinds of different economic scenarios. For more information on building a safe portfolio in today’s economy, speak to a Redhawk Financial Advisor near you today