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Policy Dilemma Eases

June 16, 2006
US data in recent days helped ease concern that the economy is not strong enough to withstand the kind of tightening the Federal Reserve may need to enact in order to return inflation and inflation expectations back within officials comfort zone. And make no mistake about it, the pendulum of market sentiment has swung hard, abandoning the one and …
Policy Dilemma Eases Policy Dilemma Eases Reviewed by magonomics on June 16, 2006 Rating: 5
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How Now Greenback

June 09, 2006
We can identify thee main considerations when trying to ascertain the near-term outlook for the US dollar: market positioning, interest rates and the G7/IMF. Let’s review each, but to cut to the chase, the first two seem dollar supportive, though the third may exert pressure in the other direction.
Market Positioning
The market had amassed substanti…
How Now Greenback How Now Greenback Reviewed by magonomics on June 09, 2006 Rating: 5
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Strong Dollar in Word, Benign Neglect in Deed

June 02, 2006
The disappointing May employment data caught the market wrong-footed. The pricing of the July Fed funds futures contract had implied almost a 75% chance of a 25 bp hike later this month prior to the data and the combination of weaker than expected payroll growth and a moderate rise in hourly earnings have seen the odds fall toward 40%. As one woul…
Strong Dollar in Word, Benign Neglect in Deed Strong Dollar in Word, Benign Neglect in Deed Reviewed by magonomics on June 02, 2006 Rating: 5
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Fed Dilema Resolved; Treasury's Just Beginning

May 26, 2006
Prior the US April jobs data, the Fed funds futures had been straddling the fence, with a roughly 50/50 chance of a hike/pause. The weaker than expected job growth resolves the dilemma and shifts the odds convincingly toward a pause. The Federal Reserve will signal to the market next week that it is prepared to pause, barring significant surprises…
Fed Dilema Resolved; Treasury's Just Beginning Fed Dilema Resolved; Treasury's Just Beginning Reviewed by magonomics on May 26, 2006 Rating: 5
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Inflation Pause at the Fed's Pause

May 19, 2006
Over the past six months, we have warned that the market has consistently under-estimated the magnitude and duration of the Federal Reserve’s monetary tightening cycle. Unwaveringly we forecast Fed funds to be at least at 5.5% by the end of this year and we recognized upside risks to our scenario. We had thought that the Fed would pause in June an…
Inflation Pause at the Fed's Pause Inflation Pause at the Fed's Pause Reviewed by magonomics on May 19, 2006 Rating: 5
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Rising Sun or Just Another Day?

April 07, 2006
Japan is emerging from an economic period that is largely comparable with the US Great Depression. The Bank of Japan has signaled an end to its quantitative easing strategy under which it provided something on the magnitude of 5-6 times the amount of liquidity Japanese banks required. It has slowly begun reducing that excess liquidity.
The gradual …
Rising Sun or Just Another Day? Rising Sun or Just Another Day? Reviewed by magonomics on April 07, 2006 Rating: 5
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Capital Thoughts as Q1 Winds Down

March 24, 2006
The first quarter is winding down. For most investors it has been a good quarter. The performance of the US stock indices have risen more than they did all last year. Major bourses in Continental European bourses, like Germany, France, and Italy rose 10% thus far. The UK’s FTSE posted a respectable 7% gain. Japan’s Nikkei was rallied nearly 40% in…
Capital Thoughts as Q1 Winds Down Capital Thoughts as Q1 Winds Down Reviewed by magonomics on March 24, 2006 Rating: 5
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Don't Discount the Dollar

March 17, 2006
The US dollar has fallen about 2.25% against the euro and the yen over the past week, its poorest weekly performance in a couple of months. Every one has their own pet theory to explain the move, but the risk is that the move has been exaggerated and that a more stable dollar tone will emerge in the coming days.
Many explanations of the dollar’s sl…
Don't Discount the Dollar Don't Discount the Dollar Reviewed by magonomics on March 17, 2006 Rating: 5
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The Dollar and Emerging Markets - Is the Rally Over?

March 10, 2006
As the first quarter winds down, the sharp rise in G7 interest rates, especially in the US and Europe, and expectations of future tightening of monetary policy, have undermined equity markets and sparked a violent sell-off in many emerging markets.
There are two key concerns for investors. The first relates to the outlook for the US dollar. Can the…
The Dollar and Emerging Markets - Is the Rally Over? The Dollar and Emerging Markets - Is the Rally Over? Reviewed by magonomics on March 10, 2006 Rating: 5
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