Thursday September 20, 2007 - 13:01:47 GMT
Share This Story
Black Swan Capital - www.blackswantrading.com
Fed Gets Its Hand in the Pot, But Risks Remain
â€¢ New Zealand Dollar Rises to One-Month High as Carry-Trade Demand Returns â€“ Bloomberg
â€¢ Pound Declines After BOE Minutes; Bank Offers Three-Month Emergency Funds -- Bloomberg
â€¢ THE WEAKENING DOLLAR IS PUTTING upward pressure on oil prices, which closed at another record of $81.93 a barrel. â€“ WSJ
â€¢ Gold Rises to 27-Year High of $730.51 an Ounce in London -- Bloomberg
â€¢ The long-widening U.S. current-account deficit appears to have begun reversing course, as growth slows. A gradual shift could correct imbalances in the global economy, but a rapid one could be painful to U.S. consumers.
Key Reports Due (WSJ):
8:30a.m. Initial Jobless Claims. Expected: +1K. Previous: +4K.
10:00a.m. August Leading Economic Indicators. Expected: -0.3%. Previous: +0.4%.
10:00a.m. DJ-BTMU Business Barometer. Previous: -0.2%.
12:00p.m. Sep Philadelphia Fed Business Index.
"When I am...traveling in a carriage, or walking after a good meal, or during the night when I cannot sleep; it is on such occasions that ideas flow best and most abundantly."
-Wolfgang Amadeus Mozart
FX Trading â€“ Fed Gets Its Hand in the Pot, But Risks Remain
For those of you who think the Fed has achieved financial market stability for the long-run might want to reconsider, or at least wait a bit longer to arrive at a final conclusion.
Sure, you can tell by just looking at U.S. equity marketsâ€™ performance over the last two days that slashing the discount rate and the fed funds rate by 50 basis points was a quick fix. But can it make a lasting difference?
The thought is, now that the Fed has opened up the window to credit, lenders can jump back on the gravy train and conduct business as usual. Weâ€™ll all go on our merry little ways like this credit crunch never even happened.
Yeah â€¦ Right.
Itâ€™s true the latest Fed announcement hasnâ€™t helped the dollar, but absolutely no one expected it would. And considering the idea that credit will become more available, we should see risk-taking (via carry trade especially) resume. Though I think itâ€™s important to note that a full resumption of the carry trade is still a long way from decided.
Have a look at the Australian dollar and the British pound since the Fed made their announcement Tuesday afternoon.
Charts AUDUSD and GBPUSD 60-minute
Both huge beneficiaries of carry trade funds before the credit crunch, but not quite the same rebound story for these high-yielders. The glaring difference: local sub prime related concerns have popped up in the U.K., whereas Australia thus far appears unaffected by local credit problems and is still blowing and going on the back of surging commodities prices.
Donâ€™t count out the impact of this sticky credit situation just yet, and be selective.
John Ross Crooks III
Black Swan Capital
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."