Monday October 9, 2006 - 10:56:28 GMT
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Black Swan Capital - www.blackswantrading.com
More than a one-off in the buck?
â€˘ Crude oil rose after six OPEC members, led by Saudi Arabia, agreed to cut output by about 3.4 percent to stem a two-month slide in prices. (Bloomberg)
â€˘ The Reuters/Jefferies CRB Commodity Price Index fell to a 16-month low last week, led by crude oil, sugar and copper. (Bloomberg)
â€˘ Key Reports (WSJ):
There are no economic indicators scheduled.
"You can observe a lot just by watching."
If commodities prices, especially energy, continue to sag it means inflation expectations might shrink.
CHART: CRB Index Daily
Two potential dollar positive results:
1) If inflation expectations shrink not only in the US, but in Europe as well, and all central banks decide to pass on rates, we are left with a situation where the US dollar short-term yield (and 10-yr yield) beats Europe and every other major except Australia (a commodity dollar).
2) If crude oil prices continue to fall, effectively the supply of dollars transferred to oil producers will fall.
CHART: Crude oil vs $ Index Weekly
The point being there are things shaping up that might suggests the dollar move on Friday wasnâ€™t just a one-off event based on a jobs surprise. Something to think aboutâ€¦
Jack Crooks, Black Swan Capital Black Swan Subscription-based Service
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