Wednesday February 1, 2006 - 11:26:24 GMT
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Black Swan Capital - www.blackswantrading.com
â€śThough this be madness, yet there is method inâ€™t.â€ť
William Shakespeare, Hamlet
25 basis points and, one could surmise from the FOMC typical cryptically transparent follow-up commentary, there is at least one more to come.
Source: The Wall Street Journal
It throws a bit a of a monkey wrench into the view that has been morphing this year: the euro-$ yield differential will begin to close favoring the euro. With Euro-landâ€™s budding recovery now firmly underway, at least in the minds of many, AND the yield gap closing, it is only right for EURUSD to rally was (or still is) the view. Well, maybe! But we donâ€™t think the dollar â€śbull marketâ€ť is over just yet.
Our Fed-speak-cryptology research team (FSCRT) toiled into the wee hours decoding yesterdayâ€™s FOMC statement; here is what they came up with:
1) The Fed thinks Q1 GDP will be strongâ€”in the 4% territory
2) The Fed is more than a little concerned material and energy prices will seep into core inflation.
3) They are concerned that if they explicitly signal an end to future rate hikes, the rally in commodities and stocks could blow-off into a speculative frenzy.
4) And the dirty little secret behind closed doors is they ARE concerned about asset bubbles and ongoing market complacency.
Oh, one more thing. Our FSCRT has a well-place mole. Said mole told our team he overheard Mr. G saying to Mr. B yesterday, after a few ladles from the punch bowl: â€śIâ€™m irrationally exuberant now that I donâ€™t have to worry about all this stuff anymoreâ€”party on!â€ť
Black Swan Capital
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