The Fed under-estimated the demand for emergency short-term funding. An additional $4.83b was required by the banks who were either (1) out-bid at the TAF auction on the 20th?, or (2) developed requirements after the auction? or (3) had seasonal borrowings?

An unusual departure from the holiday seasonal adjustments - finds the banks scrambling. The Fed has the economy in a vice grip.

The exchange value of the dollar bottoms in Jan. Then it rises until Feb-Mar. Afterwards the debacle continues.

http://research.stlouisfed.org/fred2/fredgraph?s[1][id]=DTWEXB

Anyone can explain why Why NFP = 18K => USD index up(+0.02)? I think NFP =18K very lower than the expextation => FED could cut rate => USD index down. But at the end of day I saw USD index up to 0.02. I don't know why.
Thank for your sharing.

"trading desk" expanded advances after banks went to the discount window for $4.83b

Sorry for the late response (just got back from vacation), but...

To cut a long story short: the market has actually been showing tepid follow-through to NFP results as of late. Why exactly? At first blush I would claim that the dismal reaction from equity markets on the day really discouraged strong dollar selling. At the end of the day, though, you really can't predict such reactions. I almost miss the days when the dollar would actually follow NFP's with some degree of purpose.

Where did everybody go?
Looks like US is in the doom and gloom tomb. Nothing but bad news all around, banks in trouble asking for help from foreign investors, and an anticipated 50 pt rate cut.They say that a recession is not recognized until it's over, but I'm thinking that we're here already as things will be "foreseeably" only getting worse before it gets better. "Please fasten your seatbelts as we are expecting some air turbulance".......

It's true. If we're to see a recession we won't know it until a couple months from now. Some people are claiming that the current level of bond market yields signal that we're actually in a recession as it stands. Are we in negative growth territory? It's possible. But the key question is how much of this is currently priced into markets and --more importantly from a trading standpoint--whether it is wise to sell US dollars as a result.

8/1/2007 0.15 -0.13
9/1/2007 -0.19 -0.09
10/1/2007 -0.48 -0.22
11/1/2007 0.14 -0.18
12/1/2007 0.44 -0.23
1/1/2008 0.80 0.15 gdp falls
2/1/2008 0.25 0.01 gdp falls
3/1/2008 0.01 0.02 gdp falls
4/1/2008 0.00 0.01 gdp falls
5/1/2008 0.00 0.00 interest rates bottom
6/1/2008 0.10 0.01 rebound
7/1/2008 0.13 0.01 rebound
8/1/2008 0.06 0.01 rebound
9/1/2008 -0.20 0.04 U.S. dollar drops
10/1/2008 -0.51 0.06 U.S. dollar drops
11/1/2008 0.20 0.05 U.S. dollar drops
12/1/2008 0.35 0.02 U.S. dollar drops

Interest rates bottom in May/June (other things being equal). If the proxy for real-gdp drops from 80 to 1, in 2 months, then the U.S. will experience negative real growth rates.

Date 2006-07-01 2006-10-01 2007-01-01 2007-04-01 2007-07-01
Value -217.334 -187.938 -197.097 -188.919 -178.456

There is absolutely no support for a currency that continues to run trade deficits (even if they are reduced). And this means the future exchange value of the U.S. Dollar will fall & gold will move inversersly to it, i.e., the dollar's loss in purchasing power. And considering the latest data on the rise in oil imports (and $100/barrel oil), the dollar's fall could accelerate. While other trading partners continue to diversify their fx reserves (as foreigners become sated with dollars), it is inevitable that the faith in the dollar will diminish -- because there are no attempts to reverse/correct the problem. A crisis could develop where hyperinflation (a flight from the dollar) might result, unless the payments gap continues to be filled by foreigners (unlikely).

Exhibit 17. Imports of Energy-Related Petroleum Products, Including Crude Oil
Details may not equal totals due to rounding.
Total energy-related petroleum products (1) Crude oil Quantity (thousands of barrels) 2007
Barrels Value
--------------------------------------------
December........381,597.........20,940,521,000
January …….....418,158…..….. 22,010,536,000
February ….…..331,818…….... 17,347,440,000
March ….…..…..422,671…….... 23,366,614,000
April …….…...….402,043….…... 24,238,490,000
May ………...…..426,026...….… 26,934,778,000
June …….…..….413,312…...…. 26,654,260,000
July ……….…....406,427….…....27,769,362,000
August …….....416,130…..….. 28,988,603,000
September. …387,135.…..…...27,146,183,000
October ……….405,860…….....30,079,622,000
November ……392,500…..…... 31,947,251,000
December.........................$328,364,181,000
============
(1) Details shown for these Energy-Related Petroleum Products are not available on a Balance of Payments basis. These products include the following SITC commodity groupings: crude oil, petroleum preparations, and liquefied propane and butane gas. NOTE: For information on data sources, nonsampling errors and definitions, see the information section on page 27 of this release, or at
www.census.gov/ft900 or www.bea.gov/bea/di/home/trade.htm.
http://www.bea.gov/newsreleases/inte...f/trad1107.pdf

Options on federal funds futures can be analyzed to extract public expectations of Fed actions. The charts below show what markets believe the most likely outcome of upcoming FOMC meetings will be. The charts are updated every business day and reflect the most recent data released by the Chicago Board of Trade. Probabilities can be estimated with various assumptions, which are described in detail here and in the readme worksheet of the downloadable Excel file. The assumptions used to construct each day's charts are indicated immediately below the pictures.

http://www.clevelandfed.org/research...unds/index.cfm

Federal Reserve Bank of Cleveland
Fed Funds Rate Prediction

humblepie,

In the case of a 25bp cut, I'd argue that the news would initially be very bullish for the greenback assuming that market expectations going into the January 30th rate decision are still for a 50bp cut. As of yesterday's close, FFFs are fully pricing in a 50bp cut and a 40% chance of a 75bp, but these probabilities tend to shift the closer we get to the actual decision. Furthermore, the probabilities tend to shift in the right direction.

The tides have actually shifted quite heavily in favor of a 75 basis points move, which is somewhat unbelievable for me, but that's what an ultra-dovish Ben Bernanke and dismal Philly Fed figures will do for you.

More in my dollar article here: http://www.dailyfx.com/story/currenc...603833478.html

Attached Images

 

Sharp drops in US equities and rhetoric from Fed officials that has reiterated their dovish tone has led FFF to price in a 75bp cut even more aggressively (72% chance as of Friday's close from 40% a week earlier). I really think the markets are overdoing it...I think the Fed will only (ha, only..) cut by 50bp.

Attached Images

 

This is nothing short of incredible. I've been proven wrong yet again about the market's Fed rate cut expectations, and Fed Funds futures have now gone on to price in a whopping 50 basis point rate cut on the Fed's scheduled meeting at the end of the month. 125 basis points of rate cuts within two weeks? Who would've expected anything like that?