Tuesday, July 08, 2008

Iraq eyeing a timetable for the U.S. Troop withdrawal

I was reading this story on AOL today.

Iraq's prime minister said Monday his country wants some type of timetable for a withdrawal of American troops included in the deal the two countries are negotiating.

I was wondering a loud today how such a decision, if reached, would affect the election and in turn the U.S. economy. Would such a decision help or hurt Barrack Obama? He has said if elected U.S. troops would be withdrawn starting in 6 months, many Americans feel strongly that this is the right move so if it is going to happen anyway would it make Obama's "platform" less appealing ?

How about the Dollar, would this strengthen or weaken it? Initially I think it would benefit from such an announcement, but then what? The money being spent on the war (Billions and Billions of it) would not be pumped back into the U.S. Economy (at least not most of it) rather I would think and hope we would begin to pay down the massive debt we have started to accumulate.

Stocks had another rocky day. I think alot of what is going on is that the financial markets are looking toward a Democrat in office and the fiscal fallout of such a move. Income Taxes will move higher. Capital Gains will move higher.Incentives for big business will be decreased. All in all not a very good picture for business.

As written before the dollar does not have a lot of upside room. I expect range bound trading over the weeks ahead with a weakening bias. U.S. Rates are on hold. I think they do not move till early next year. ECB rates, if you believe Trichet are also going no where fast. I like yield in times like this. When markets trade sideways the cost of running short a 12-17% currency (Brazil,Argentina...) is very painful. I think this is occurring.

Good Luck and Good Currency Trading.



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