PFX Commodities and Crosses Trading Outlook: 17 September 2008
by John Jagerson
REVIEW: 16 September 2008
The Fed left rates alone today without a big change from 2.00%. I think this was a mild surprise as many traders were beginning to look for a cut after yesterday's debacle in the credit and equity markets. Interestingly, the Fed sent out an email this morning that they would not only be injecting the "normal" $20 billion in to the cash market with a repo but that they would also be injecting a much larger amount later in the day, which they did to the tune of $50 billion in overnight lending.
The Fed does these repos and cash injections to manage the target rate. If they are having to go to these extremes just to keep the rate at 2%, I don't think it is reasonable to expect them to decrease rates any further in the near term. The battle to keep rates as low as they are is going to be difficult enough as the market works its way through this fundamental change in the way traders and investors perceive and deal with risk.
PREVIEW: 17 September 2008
To a certain extent I am waiting for the rest of the news that appeared today to be digested by the market once traders are able to think about anything besides AIG, the Fed and Lehman. TIC data was released today with very poor results and CPI was also released showing a decline in inflation that took traders by surprise. These are not that great for the value of the USD and may seriously disrupt (at least temporarily) the trends in the forex.
We will be watching the minutes from the BoE and housing numbers in the US from an economic view point but most traders are likely to be concentrating on the "unknowns" that are likely to continue emerging from a imploding US corporate economy.
Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. Forex Capital Markets LLC. will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.