Fed cut rates but indicates reversal of fiscal policies – bullish for dollar and bearish for gold
Kirsten McLauren
May 1, 2008

The Federal Reserve cut interest rates by a quarter percentage point to 2 per cent on Wednesday and signalled its preference to pause at its next meeting in June.

Fed is now concerned about monetary ease and consequent rise in inflation. Richard Fisher, president of the Dallas Fed, and Charles Plosser, president of the Philadelphia Fed, dissented in favour of no rate cut. US economy grew 0.6 per cent in the first quarter. However, excluding inventories, real final sales were negative implying the economic slowdown and risk on the downside for a deep recession. It seems Fed is now concerned about dollar. The fioscal policy change from Fed and Bush Adminiostration is some what clear at this stage. They want to bring down the crude oil price through lower gold price and higher US Dollar.

The US Dollar fell on the news. But chart watchers watched something called monthly gap reversal. That is a technical green signal on the up side. Dollar index should test 80 in the next several months from its current level of 72.

Fed cut rates but indicates reversal of fiscal policies – bullish for dollar and bearish for gold
Kirsten McLauren
The Federal Reserve cut interest rates by a quarter percentage point to 2 per cent on Wednesday and signalled its preference to pause at its next meeting in June.
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