Reply #10: dollar watch [View All]

[UpInArms]

http://quotes.ino.com/chart/?s=NYBOT_DX&v=i

Last trade 73.410 Change +0.404 (+0.55%)

Dollar Trades Lower As Risk Aversion Recants Bullish Outlook

http://www.dailyfx.com/story/bio1/Dollar_Trades_Lower_As_Risk_1210114642546.html

Despite a quiet economic calendar, the US dollar was on the retreat Tuesday against most of its major counterparts. For those majors that weren’t caught up in cross fundamental currents, the greenback selloff was partly a carry through on the single currency’s ongoing reversal of last week’s strong rally. There was also a more active component to the decline in the form of a general souring in risk appetite – but more specifically, American risk. Ben Bernanke and his fellow Federal Reserve policy makers have made a remarkable effort to head off a recession and stabilize the broad financial markets with a cumulative 325 basis points of rate cuts and unusual means for injecting liquidity into the frozen credit markets. In fact, after last week’s quarter point cut from the FOMC, the market is pricing in an 86 percent chance that the Fed Funds rate will be left unchanged at 2.00 percent. However, recent data has offered little reason to suspect financial conditions are improving nor that the economy would avoid a contraction in the second quarter. Today, an article on Bloomberg News quoting a study from Jupiter eSources LLC revealed bankruptcy filings among businesses rose 49 percent in the year through April – the most in a year. With individual filings included, the rise over the same period measured 31 percent. This highlights an often overlooked concern: that the Fed’s efforts haven’t been passed through to the consumer – a necessity if growth is to recover. Looking ahead to tomorrow fundamental activity picks up modestly with March pending home sales and credit spending. Both indicators have little market moving precedence.

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ECB: Will Trichet Back Off From His Hawkish Bias This Week?

http://www.dailyfx.com/story/topheadline/ECB__Will_Trichet_Back_Off_1210092676542.html

The European Central Bank is widely expected to leave rates steady this week at 4.00%, but the big question for the markets is: will he remain hawkish or focus more on mounting downside risks to growth? Estimates for Euro-zone CPI during April did ease to 3.3 percent from 3.6 percent, but this is still well above the ECB’s 2 percent target, and as a result there’s little doubt ‘price stability’ will be the foremost concern for Trichet. However, if he suggests that price pressures will moderate in the near-term – as they have recently started to do – or that feeble financial market conditions and the US economic slowdown are a major threat the Euro-zone growth, the euro could actually sell-off across the majors on Thursday.

US Fed: Credit Markets Will Likely Remain A Problem, But Rate Cut Cycle May Be Over

As expected, the Federal Open Market Committee reduced the target fed funds rate by 25bps to 2.00% last week, but there were indications that the current rate cut cycle may be nearing an end. While the FOMC clearly remains concerned about the economy, the Committee said for the first time that their past easing of monetary policy “substantial.” This comment along with concerns that “inflation expectations have risen” and removal of the phrase saying that "downside risks to growth remain" suggests that steady rates may be on the way. However, lingering credit market concerns following the announcement of multi-billion dollar losses at Fannie Mae and UBS is keeping hopes alive for more accommodative policy in at the FOMC’s next meeting. Nevertheless, futures are currently only pricing in a mild 16% chance of a 25bp cut in June, with the odds in favor of the target fed funds rate staying pat at 2.00%, as the FOMC will likely continue to try to confront liquidity issues with expanded lending facilities like TAF and TSLF.

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