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09/09/2007 - Risk aversion remains the key focus, not the USD

Posted by FOREX.com's Weekly Strategy in September 7th 2007  
* Risk aversion remains the key focus, not the USD
* Concentrate on JPY-cross selling (carry trade unwinding)
* Despite weak NFP, a Fed rate cut is still not assured
* Fed speakers on Monday will tell us what to expect
* US retail sales on Friday are the next key to the Fed outlook

The US dollar took a pounding after Friday's NFP report indicated a loss of -4K jobs in the month of August. Revisions to June and July were also negative, compounding the appearance that the US economy is tipping over, weighted down by ongoing real estate declines, higher consumer lending rates and tighter lending conditions. Street analysts are back flipping over themselves to forecast how aggressively the Fed will cut rates at its Sept. 18 meeting, with futures markets pricing in a 75% chance of a 1/2% rate cut as of Friday. However, I would suggest the situation is not as clear cut as the market consensus seems to expect.  Full text »

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Filed under: Weekly Strategy