Fed Continues To Pause
U.S. Treasury bond yields fell to six-month lows during the
day, but recovered some, after the Fed left rates at 5.25%. The recent
slide in oil and slowing growth in the U.S. economy led the Fed to keep rates as
is, for the time being. The Fed also said that some inflation risks do
remain, which left the door open for more hikes in the future. Interest
rate futures show a 90% chance that the Fed will keep rates at their current
levels into year-end.
The dollar declined against both the yen and the euro today,
after the Fed announced its decision to keep rates at 5.25%. After two
meetings of a Fed pause, global investors are seeing less reasons to support a
dollar backed by a slowing economy and little inflation. The euro lost
moderately against the yen as well during the day’s trading.
Crude oil futures fell 2.4% to close at $60.20 a barrel as
President Bush supported negotiations with Iran. Crude oil reached a
record high of $78.40 over the summer, when the war raged in Lebanon amidst
other major geopolitical tensions. With safe inventory levels and the
prospects of negotiations at hand, though, the price of oil has plunged over the
last few weeks. Natural gas also fell today, down 1%, as mild weather and
ample inventories continue to ease supply concerns.
Gold futures rose 0.5% to close at $586.20 an ounce today,
after the futures contract neared a 3-month low. The low price of the
safe-haven metal prompted investors to buy, as the contract ignored the decline
of its familiar trading partner (oil). Gold has risen 13% during the year
of 2006. Silver and copper both declined, however. Silver fell
moderately while copper fell to 8-week lows after a housing report yesterday
forecast diminishing demand in the metal.
The softs traded mixed today. Cocoa rose 2.2%, coffee
fell 1.1%, orange juice rose 1.5% and sugar fell 1.4%.
The grains also traded mixed. Corn rose 1%, wheat fell
0.3%, soy rose nearly 1% and oats fell 2.3%.
Meat fell today, with cattle down 1% and porkbellies down
nearly 2%.
Fed Leave Rates Unchanged, Still
Worried About Inflation (full
story).
Crude Inventories Drop Again, Gasoline Stockpiles
Continue To Edge Higher (full
story).