Friday, November 17, 2006

What is the Fed's next move

I have been watching the latest economic numbers and listening to "Fed Speak" trying to find a new direction/trend to grab hold of. "Fed Speak" has clearly been on the hawkish side. Inflation (although I do not see any) is a major concern and if push comes to shove the Fed seems to be signaling that they will err on the side of caution. But the economic numbers coming out are clearly on the weaker side. What to do, what to do. I am certainly confused. My head says that the next move by the Fed will be to lower rates (Feb-Mar 07) and I think the market will begin moving this way soon. Currently the dollar is trading at the lower end of its range against the Euro and I think it is just a matter of time before we break through lower. U.S. dollar interest rate futures have been unable to maintain a bid. I believe this is because of the conflicting story which I have stated above. I have been lightening up on me EM positions as although I believe they are correct over the medium term, the near term could be a different story.



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