Tuesday November 17, 2009 - 15:01:35 GMT
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Cinneas.com - blog.cinneas.com
The Fed likes Stocks...
The last two days have seen significant Fed speak regarding US equity markets and the USD. What have we learned from it? First of all we note that the Fed believes that US stocks are not overvalued at these levels. This is significant because the Fed has been verbal in the past - We note Greenspan's 'Irrational Exuberance' comments and their affect on the market. With the Fed saying Stocks are fairly valued they essentially leave the door open for further gains. Regarding the USD, Bernanke yesterday repeated the mantra that the USD is merely retracing from its strength gained from the time of uncertainty this time last year. In addition, the Fed notes there are no signs of a bubble at present. These comments lead us to believe the USD can weaken further and US equity markets can continue their march higher. Certainly there is a good amount of volatility at the moment, but this should soon pass. We still expect the USD to weaken going forward and see the latest strength in the USD against AUD, CAD and the EUR as being an opportunity to get back into the short USD trade.
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