The shared currency edged
lower against the greenback on Friday, but still ended the week higher after
the Federal Reserve indicated that its isn’t going to raise interest rates for
a long period of time. The greenback remained under pressure after the Fed gave
no indication of when interest rates could start to rise at the conclusion of
its two-day meeting on Wednesday. In addition, the Fed’s forecast of where
interest rates might reach in the long term fell from 4% to 3.75%. The central
bank cut its bond purchases by $10 billion a month, to $35 billion, saying
there was "sufficient underlying strength" in the U.S. economy to
continue tapering. Despite this, the Fed also lowered its forecast for growth
this year to a range of 2.1% to 2.3% from 2.8% to 3.0% previously, due to
"unexpected contractions" in the first quarter as a result of the
unusually harsh winter.
The Fed acknowledged the recent increases in inflation
and drop in unemployment, but Chair Janet Yellen said no formula was in place
for when interest rates would start to rise. In the blue region, The ECB plans to offer banks targeted
long-term loans, or TLTROs, of as much as 400 billion Euros ($544 billion) for
four years, with the condition that they boost credit to companies and
households. By offering the loans at a small premium to current ultra-low
rates, the ECB is signaling that borrowing costs will eventually increase.
Banks have an incentive to use the program if they believe rates would be
higher at the end of the loan period. The ECB’s benchmark rate is
0.15%. Euro dipped 0.06% to 1.3598 late Friday, but posted a weekly gain
of 0.47%.
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