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Curiouser and Curiouser

July 28, 2006
In response to the disappointing preliminary Q2, the market took bond yields lower and the dollar with it. The market downgraded the likelihood of a Fed hike on August 8. Indicative pricing in the Fed funds futures market implies the odds of a hike have fallen to about a 33% chance, the lowest since mid-June and well off the 85% chance seen at the…
Curiouser and Curiouser Curiouser and Curiouser Reviewed by magonomics on July 28, 2006 Rating: 5
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Bernanke Preview

July 18, 2006
Given the heightened uncertainty about the near-term outlook for US monetary policy, this week’s semi-annual congressional testimony by the Federal Reserve Chairman will be closely scrutinized for clues. Federal Reserve Chairman Ben Bernanke’s semi-annual testimony before Congress this week is looked.
The risk is that the market is disappointed. F…
Bernanke Preview Bernanke Preview Reviewed by magonomics on July 18, 2006 Rating: 5
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Could Bernanke be Dollar Negative?

July 14, 2006
The US dollar has recovered nicely from the sell-off that culminated in the immediate aftermath of the disappointing jobs data at the start of the month. These gains were scored despite the movement of interest rate differentials against the US. The fact that the premium the US offers over the euro-zone has narrowed also means that US debt instrum…
Could Bernanke be Dollar Negative? Could Bernanke be Dollar Negative? Reviewed by magonomics on July 14, 2006 Rating: 5
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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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