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Dollar Falls Before Fed Meeting, But May Bounce Back

The US Dollar fell before the Fed meetings that began to take place today, which was a little surprising because most people thought that the expected action that the Federal Reserve was going to take was already priced in.

The action spoken of is the “Operation Twist”. In simple terms, the Federal Reserve is going to rearrange it’s debt so they are holding more instruments with longer term yields. Since the interest rate is already super low, this is the next best thing they think they can do to help stimulate economic growth.

The downfall may also be attributed to the IMF statement that if things don’t change soon, the US and Europe could fall into another recession before things improve. Generally speaking, everyone was aware of this, but when you get an organization like the IMF stating it, a larger impact is made.

We will have to wait until the Fed meetings conclude late on Wednesday to see what the specific details of the changes they are going to make will be, but a lot of people expect the US Dollar to self correct and bounce back up.

 

Europe Falling Behind, Says IMF

When a very large portion of the world is experiencing financial difficulties, Europe seems to be falling behind when it comes to dealing with their situation, instituting the necessary changes to remedy their situation, and make progress in general.

The IMF has said once again that Europe has to get moving and start making progress – they have been in a bad situation for some time now and there have been lots of meetings held and plans discussed, but nothing has really been done. Greece, for example, hasn’t met the requirements of its first bailout loan, and even though Italy passed a new austerity package last week, S&P still decided to downgrade its credit rating because they didn’t think it was sufficient.

The countries in the EU that are still doing relatively OK, like France, Germany and The Netherlands, are getting fed up with the lack of progress as well. They are the ones who have the most to loose if things continue to get worse, and all their poking and prodding isn’t yielding any real results.

When you look at the situation in America, things aren’t getting any better. But, some progress is being made and there is some confidence being restored at a very slow rate. The two situations are quite different, but on the world stage, the EU needs to step up and get moving.

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