Wednesday, October 31, 2007

Consequences Of The Fed Move

Not good:

NEW YORK (AP) -- The dollar skidded to a new low against the euro Wednesday while the British pound broke through $2.08 after the Federal Reserve lowered a key interest rate by a quarter percentage point to 4.5 percent.

The Canadian dollar bought more than $1.06 for the first time since 1957.

The 13-nation euro soared to $1.4503, its fourth new high in as many trading days, while the British pound bought $2.0813, after having hit a high of $2.0822 Wednesday.

The euro bought $1.4434 in New York late Tuesday, while the pound was worth $2.0679.

And oil?

NEW YORK (MarketWatch) -- Crude-oil futures hit a new record high in after-hours trading on Wednesday, surging as high as $95.28 a barrel on the New York Mercantile Exchange after the Federal Reserve cut interest rates and the Energy Department reported a much higher-than-expected drop in crude supplies. Crude oil for December delivery was last up $4.84, or over 5%, at $95.22 a barrel on Nymex. Earlier, crude settled at $94.53 a barrel in the regular trading session.


NEW YORK (MarketWatch) -- Gold futures surged above $800 an ounce for the first time since 1980 on Wednesday after the Federal Reserve cut the fed funds rate by a quarter-point to 4.50% and said that the recent spike in commodity prices may put renewed upward pressure on inflation.

In after-hours electronic trading, gold for December delivery rose as high as $800.80 an ounce on the New York Mercantile Exchange, its highest level in nearly 28 years. The all-time high for a benchmark gold contract on Nymex stands at $875, set on Jan. 21, 1980.

Earlier Wednesday, before the Fed rate decision, gold rose $7.50 to settle at $795.30 an ounce, boosted by a record-setting rally in crude-oil futures.

"Bullish crude, bullish gold," said Zachary Oxman, a senior trader at Wisdom Financial. "I think the Fed had a choice, housing or inflation, and they chose housing. As such, you've got inflationary pressures running rampant despite what the government tells us."

"I'd peg real inflation at over 6% and I think that will continue to put pressure on the dollar and increase gold and crude prices," Oxman said in emailed comments.

Uncle Ben says inflations is running less than 2% annually.

Of course that's core inflation, stripped of food and energy costs.

But the Fed says only the core inflation numbers matter.

So those of you bitching about commodity prices can just go scratch - inflation is tame!

Uh, huh - which is why the dollar is falling through the floor, gold is over $800 an ounce and oil is near $100.

Heckuva job, helicopter boy.

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