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July 21st 2005

Greenspan testifies before Congress

In his recent testimony before select members of Congress, Alan Greenspan reiterated his optimism in the US economy.  While he remained upbeat in his forecasts, however, he was careful to identify several potential weaknesses, including rising energy and unit labor costs, and the apparent formation of regional real estate bubbles. Greenspan also hinted that the Fed would continue to raise rates at a gradual, or ‘measured’ pace towards that proverbial neutral level.

Many traders reacted negatively to Greenspan’s testimony, expecting him to paint a rosier picture of the economy. Nonetheless, at least two additional interest rate increases have been priced into most securities. Insofar as there are no surprises, it should be smooth sailing for the USD. Reuters UK reports:

Analysts said Greenspan’s assessment of the world’s largest economy should prop up the dollar in the longer term, but for now some investors were taking profits on their greenback holdings.

Read More: Dollar falls after Greenspan

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Posted by Adam Kritzer | in Politics & Policy, US Dollar | No Comments »

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