Forex - Emergency Fed cut slashed Dollar against major currencies
The Dollar tumbled against major currencies except the Yen on Tuesday after the Federal Reserve unexpectedly slashed its benchmark overnight lending rate in an attempt to allay market fears of a US recession. The Fed’s emergency move to cut rates by 75bp precipitated the world stock markets weakness. Short-term interest rate futures were pricing in a 25bp rate cut at the Jan. 29-30 meeting and showed a roughly 80% chance of a 50bp cut.
The US central bank’s move wiped out the Dollar’s yield advantage over the Euro, with the federal funds rate target now at 3.5% and official euro zone interest ates at 4%.