A good portion of the trading day for the indexes was spent in the plus column. So new discovery: A sliding dollar, falling treasurys along with a 2nd consecutive closing crude oil record is what it takes to keep the market flat. Yesterday, with surging gold and a sinking dollar, stocks rallied. It some ways it makes no sense, but then again, investors are awaiting the big rate decision next week which has meant lackluster (from a volume standpoint) and range bound trading.
Where folks have been willing to belly up to the bar and make market moving bets on the outcome of the Fed meeting on Tuesday is in the foreign exchange. Dollar Trades Near All-Time Low Versus Euro on Slowing Economy. Forex traders are expecting the Fed will ease and have hammered the U.S. currency as a lowered fed funds rate would mean a widened rate differential with the rest of the world and a less attractive U.S. asset situation.
Given the size of recent moves in the dollar, it seems as if 50 bps in fed funds cut is being priced in by the Forex players imho. They could be setting themselves up for a big surprise if Bernanke & Co decide to be central bankers aren't there to bailout entities that made bad lending decisions. Bank of England governor Mervin King made clear the BOEs position today and briliantly reminded the Fed and the ECB of what a central bank's mandates are: To the rescue? Not King. From one King to another.. keep up the great work, Merv.