The U.S. Dollar Moving to the Line of Least Resistance

After intense negotiations, Democrats and Republicans found an agreement over the U.S. government rescue proposal. Nonetheless, the financial markets are very prudent, as the plan must be voted by the House the Representatives and the Senate. The U.S. dollar, in the mean time, continues to consolidate in thigh range.

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Government interventions almost completed

As the tail (is it the tail?) of the financial crises is expanding deeply into the banking sector, the Federal Reserve and the Treasury department are making an enormous effort to get things going again. With the objective to decrease risks and to secure a smooth transition, the U.S. government announced that Goldman Sachs and Morgan Stanley would become deposit taking banking institutions. So, the only two remaining investment banks are becoming bank holding companies making and end of the private investment bank in the United States. In addition, the Bush's proposal for a USD 700 billion rescue plane is about to become a reality, upon congressional approval, after two days of negotiations between the Congress and the U.S. Government. The TARP (Trouble Asset Relief Program) deal is a systematic approach whose main goal is to provide liquidity to troubled lenders and to give some confidence to domestic and foreign investors. Especially, after Washington Mutual was considered unsound by the Office of Thrift Supervision, as panic withdrawals took place. The largest banking failure in the history of the United States, right after Lehman Brothers default, will surely leave some scars behind. JP Morgan will acquire its loan portfolio and banking operations for USD 1.9 billion. Nonetheless, uncertainty might depress the international demand for U.S. assets and weigh on the U.S. dollar over the long term.


Angelo Airaghi is a Commodity Trading Advisor, registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international media.

This article contains the following sections:

Government interventions almost completed

The U.S. economy is still in trouble

ECB's rate cut missing

EURO/USD: tight consolidation continues