Quote:
Originally Posted by DollarBull
The Fed is up in arms to prevent a full scale recession. The 2-year bonds are yielding just 1.5%, which means the Fed has to cut rate by as much as 150 bps to even the game. The Fed is apparently unwilling to do that record-breaking cut and instead resorting to alternate tactics to enable consumer and business spending. Thus, the odds of rate-cut in the next Fed meeting (on 18th) is reduced and even if they cut it won't be more than 0.5 to 0.75. We will know how much they will cut by looking at the short term bond yields the day before.
Naturally, this is going to be Dollar friendly. In particular if Fed signals end of rate-cuts it is going to trigger the reversal anticipated for a while.
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2 year bonds yielding 1,5 percent does not mean Fed funds should be 1,5 percent too. It just means the yield curve is inverse. Even 5 year yields can be lower then money market rates. I agree that the next rate cut will probably be 'only' 50 bp instead of 75.
Anybody any great idea on the dollar? Have we seen the top? I think we could go to 1,5250 now, which is the first Fibo level. I still think markets need to figure out what all this means and if it is enough to calm things down.
Good luck.
