Weekly Review: FED Raises Discount Rate

Late last Thursday, in a surprise move, the FED raised its Discount Rate to 0.75% from 0.50%.

The move caused the dollar to strengthen across the board, and left the Dollar Index at its highest level in 8 months. Before the FED move, the dollar had been moving higher last week against the Euro, Pound and Yen.

The dollar’s initial strength occurred even as equities and commodities rallied. Media outlets were attributing the dollar’s strength to positive economic numbers even though Jobless Claims and the FOMC Minutes were unspectacular. Therefore, at GFC Markets, we believe that the dollar may be benefitting from short term institutional funds being rotated into the dollar from the euro and pound. The goal would be to park funds in dollars until the Greece economic turmoil boils over......More detail