Forex Education and Analysis

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.

Upcoming announcements:
- Housing Permits (USD)
- BoE Minutes (GBP)

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