As expected by the FMI-Team, Mr.Ben Bernanke did cut the US interest rate by 25 bps to 4.25%. This rate cut was expected by the market and USD was already quoted at discounted rate. Cutting rate at a measured pace, is an appropriate action from the Federal Bank under the current circumstances.The market was uncertain and concerned about the probable rate cut by 50 bps. This could be noticed as, Euro and British Pound were quoted higher against the USD. Since our ForexMetrics Currency Index (FMCI) was constant and well within the volatility range, we did not expect any drastic move by the Federal Bank, as the US economy is healthy. Also, the probability of recession is diminishing.

ForexMetrics Currency Index (FMCI) has marginally increased from last week. This confirms that, the impact on global currencies by this rate cut is positive. This explains that, globally, the growth rate may gradually increase as expected.Considering, the US being one of the main economic engine globally, our index is not dependant on the US, however, inspite of strength in other major currencies, our Index has declined by 5.46%. This phenomena of a drop in FMCI, even though the global economies are booming, explains that the inflation is greater than growth. The boom could be a bubble.

Conclusion : ForexMetrics Currency Index (FMCI) reflects that the global boom is present, but the decline in our Index along with increase in the value of currency, confirms that, the inflation has caught up pace with the growth, globally and the economies are overheated and may lead to correction, globally.Our Forex Market Strategy is as per our expectations.

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