Slicing and Dicing Ahead of the Fed …
Posted on Tuesday, June 24th, 2008 | In Current Market NewsToday begins a heavily anticipated FOMC meeting. Yeah, we know all the meetings are hyped-up quite a bit, but this one’s a little different. That’s because the head hauncho, Ben Bernanke, has changed his tone.
Coming off a series of rate cuts that’s taken the Fed Funds rate from 5.25% all the way down to 2%, Bernanke is talking like he’s already prepared to start hiking his benchmark rate right back up. His comments over the last few weeks have been aimed most directly at inflation (rather than the potential for further economic weakness). He’s even made clear remarks about the consequences of a weak U.S. dollar.
Here’s a look at how yield side of the Fed Funds futures has been behaving while Ben is out talking the talk. In a nutshell, it’s telling us the market expects the Fed Funds rate to be at about 2.5% by November …
The area circled shows a Fed Funds rate spike down towards 1% — meaning the market expected the Fed to soon bring the Fed Funds rate down to that level. But by the time the following FOMC meeting rolled around the Fed only brought their benchmark rate down to 2%. And since then it’s been jumping.
The spike towards 1% also corresponds to the all-time intraday low for the U.S. dollar index. Since that point we’ve seen quite a shift in dollar sentiment.
Heading towards tomorrow decision, we’re under the impression rhetoric could waver but the Fed Funds rate won’t budge; not even little. The official Fed Funds rate will remain at 2%. Still, we can’t help but notice from the chart how trader’s expectations have changed. But even if we’re accurate and a rate hike is still months away, perhaps this chart is already telling us the worst is over for the buck … at least for a while.
Regards,
Jack & JR
Last 5 posts by Jack Crooks
- Only Gold Is Winning the Ugly Contest - February 26th, 2009
- Stocks AND Dollar to Rally in the First Half? Keep Hope Alive - January 6th, 2009
- We’re Bullish on the US Dollar Today ... and Tomorrow! - January 5th, 2009
- Can we rest? Gold may lead the way. - December 22nd, 2008
- A super deal on the U.S. dollar - December 20th, 2008
 About Jack Crooks (http://blogs.moneyandmarkets.com/blog/currency-corner)
John (Jack) Crooks is the founder and president of Black Swan Capital, an independent advisory firm specializing in foreign exchange and currency markets investing for retail and institutional clients. A seasoned financial advisory with nearly 20 years of investment experience, Mr. Crooks uses both quantitative and qualitative approaches to determine the fundamental driving force(s) behind the movement of the currency, capital, and commodities markets. He is the editor of Weiss Research’s latest investment offerings, World Currency Alert and World Currency Options, which were launched in August 2007. Mr. Crooks also founded Ross International Asset Management, a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. Previously, he was general manager of Plexus Trading, where he specialized in currency futures and commodities trading. During his successful career, Mr. Crooks served as chief currency and futures strategist of M2 Futures Inc., an investment boutique headquartered in Chicago, as well as vice president of Global Strategic Research for an international investment boutique, where he was responsible for providing daily advice and global strategy analysis. Prior to entering the investment arena, Mr. Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics and has been published in Asian Times, Futures Magazine, Barron’s, Bloomberg, Dow Jones Newswire, and across many financial websites. He has also appeared on Bloomberg TV and CNBC. Mr. Crooks holds a bachelor’s degree in finance from Florida State University and a master’s in business administration from the University of North Texas. |
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