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01/13/2008 - Bernanke cements expectations for a 50 bp rate cut Jan. 30

Posted by FOREX.com's Weekly Strategy in January 11th 2008  
* Bernanke cements expectations for a 50 bp rate cut Jan. 30
* Rate cuts unlikely to stem fears of a US recession
* Slower China is hitting global growth expectations
* Inflation, housing data are keys next week
* Bernanke to testify before Congress on Jan. 17

The USD is finishing the week mixed against other major currencies, with gains against the JPY, GBP and CAD, but lower against EUR, CHF, AUD and NZD. US stock market declines continue to overshadow all other market developments, providing one reason why the USD remains relatively rangebound. Important developments in the past week were Fed Chairman Bernanke's downbeat economic assessment and vows to take timely and decisive action to support the economy. His comments on Thursday effectively put a lock on a 50 bp rate cut to 3.75% on Jan. 30. However, stock market losses on Friday convinced traders that there was room for even steeper rate cuts, as Fed Fund futures began pricing in nearly 40% likelihood of a 75 bp. rate cut. Against this backdrop, the USD held up remarkably well, failing to extend losses against the EUR beyond the EUR/USD highs seen after the Dec. NFP report at 1.4825.  Full text »

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Filed under: Weekly Strategy