Friday June 23, 2006 - 10:45:23 GMT
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Black Swan Capital - www.blackswantrading.com
Is it still about rates?
Just another day in paradiseâ€¦The dollar rallied yesterday on, ah, well, poor economic news. (A report designed to show the economy's future direction declined by 0.6% in May to 137.9, according to preliminary estimates by the Conference Board, the WSJ reported.) $-yen appeared setup to fall, but of course it soared on the excuse the BOJ was weakened by the investment scandal concerning its governor. But most of the players knew the facts before yesterdayâ€™s jump in $-yen.
There are rumblings of a slowing global economy in the market. Does the price action in currencies yesterday, and this morning, indicate the dollar may rally on such a backdrop? Even if said slowdown is US-led? Does it matter who leads it?
Or is it all about interest rates? The bond market, which speaks with forked tongue at times, is hinting the Fed will be showing aggression.
â€śThe Fed might push interest rates even higher than thought, some economists are starting to say.
â€śWith the inflation environment looking less benign, a small vanguard of major investment banks project the Fed will push its overnight target rate as high as 6% in coming months, from 5% currently,â€ť according the Wall Street Journal.
10-year Treasury bond prices put in a new intermediate-term low, ditto for Eurodollars:
We get a look at US durable goods orders this morning. Maybe it validates the slowdown. The question is: Does it matter for the buck? The euro is testing its recent lows at 12525:
Jack Crooks, Black Swan Capital
Black Swan Subscription-based Service
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