Forex Investment and Currency Trading

Market continues to believe that the Fed will remain on hold, as downside growth risks remain important.
Volatility in interest rate space has increased macro uncertainty….which is likely to exert upward pressure on equity market volatility.
Equities also likely to feel the pain as central banks talk tough and cyclical picture remains weak
Market continues to believe that inflationary pressures will moderate later in the year as slack emerges and commodity prices stabilise…
…However in the near-term equity markets are likely to face significant challenges from the macro front.
Global equity markets continued to come under pressure yesterday with SPX and DJ Stoxx shedding 0.24% [...]

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FED is likely to satisfy the market’s reduced expectation of only a 25bp ease. Doing so would take advantage of the passing of the worst of the financial crisis, which the Fed largely addressed via the various non-rate liquidity provisions, as well as the breathing space afforded by the Fed’s historically fast pace of cutting rates. Assuming that the US economy dipped into recession during February 2008, data from recessions since 1973 indicate that the 225bp cut in the months leading up to the first month of the recession were the most extreme except for the 1981 experience, which was [...]

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Last week the markets moved to price in only a ¼% cut at the April 30th FOMC meeting. Longer term, the futures point to Funds rate remaining at about 2% this year, then starting to rise early next. Market still sees rates going down to 1% in this downturn but now expects the low may not be reached until 2009. This reflects the vew that the US downturn will be drawn out over an extended period as banks and consumers rebuild their balance sheets following the ongoing bust in the housing market. Three more quarter point cuts are now expected [...]

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Amid signs of an economy that struggles to remain afloat and rising price pressures, minutes from the March 18 FOMC meeting reveal the Fed’s concerns about the economic outlook, credit stresses and the importance of maintaining its inflation-fighting credibility. This week’s data releases on retail sales, housing and industrial production will show continued weak product demand and output, while reports on the CPI and PPI reveal significant increases in headline inflation.
The minutes from the March 18th FOMC meeting reveal the Fed’s concerns on many dimensions. They describe in detail how strains in financial markets had increased, and describe Fed initiatives [...]

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