In the currency market, the dollar dropped lower against the euro. Late Wednesday, the euro was trading at $1.2883 vs. $1.2707 on Tuesday.  The news of the day, which brought the dollar back from its lows vs. the euro, was the FOMC’s interest rate cut of a half-point, down to 1%.

The Fed’s decision was unanimous. Cited was the fact that the pace of growth has slowed “markedly” and concern that financial market strains could put the economy at greater risk. “The intensification of financial market turmoil is likely to exert additional restrain on spending, partly by further reducing the ability of households and businesses to obtain credit,” the statement said.

In addition, “In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate in coming quarters to levels consistent with price stability,” meaning that inflation is no longer even on the radar screen.

The Committee also said it “will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.” That leaves open the tantalizing possibility of yet another cut in the future.

How low can they go? Lower, thinks Ian Shepherdson, chief U.S. economist at High Frequency Economics, who said the “downbeat” statement from the Fed caused him to pencil in another half-point cut at the Fed’s December 16 meet.

Source: Dollar sinks against euro -  Fed rate cut fails to support buck

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