Forex Investment and Currency Trading

Fed have left interest rates unchanged. They are taking the line that easing rates will not solve the liquidity issues that are present in the current market.
Equities have been pushed lower, and the dollar is stronger.

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Canadian Economic Data and Events         

Net Change in Employment  
Unemployment Rate
Ivey Purchasing Managers Index    

The July employment report saw the stunning 55,000 decline in employment in the month. Expectations had been for generally flat growth consistent with minimal gains in overall GDP growth in recent quarters. The decline was skewed towards an outsized 48,000 drop in part-time work with full-time employment down a more modest 7,000. For August it is assuming that some of the weakness in part-time employment reverses and contributes to overall employment rising 15,000 in the month. The other major surprise in the July release was, despite the plummet in [...]

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FOMC Meeting (August 5th): Market expects the FOMC to maintain its 2% Federal funds rate target this week for a second consecutive meeting. The economy continues its below-trend line expansion, hampered by the housing contraction, financial market strains and tight credit conditions, weak labor markets and high input costs. In describing the downside risks to growth, the Committee is unlikely to re-state that they have diminished. Recent increased financial strains induced more sober rhetoric from Chairman Bernanke in his semiannual testimony, likely to hold up here. But the FOMC will clearly state that upside risks to inflation and inflationary expectations [...]

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The FOMC left the Fed Funds rate at 2.00%. The statement largely reflects the flurry of inflation
concerns raised by Fed officials following Chairman Bernanke’s comment that the Fed will “strong resists” the erosion of price expectations (June 9). BUT, although the statement reflects a hawkish undertone, it lacks an outright hawkish bias and seems to show reluctance on the part of the Fed to hike rates in the near-term. Key phrase: “Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased”.
June 25, 2008
The Federal Open Market Committee [...]

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The tension between still strong growth and higher inflation, and the consequence of higher rates will continue to define how risky assets perform going forward, in particular the relative performance of bonds versus equities. As long as the markets believe that rising bond yields are largely a by-product of good growth, not rising inflation, then equity markets should be
able to cope.
In this regard, it is important that central banks remain vigilant. Reassuringly, there is little sign that they are becoming complacent about the inflation risks. While the Fed is widely expected to leave the funds rate target unchanged at 2% [...]

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