10/28/2007 - More downside for the USD ahead on expected Fed rate cuts |
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* More downside for the USD ahead on expected Fed rate cuts
* BOJ to stay on hold, again
* Oil prices, credit concerns pose an obstacle to stock market recovery
* Heavy data calendar all around
* Fed rate decision on Wednesday; Oct. NFP on Friday
The US dollar lost further ground this week as the G7 failed to make any reference to USD weakness/EUR strength and incoming housing data highlighted only bleakness. Tellingly, the only time the USD experienced any strength was on Monday when a larger than expected write-off by Merrill Lynch triggered a stock market sell-off, which sent JPY-crosses (carry trades) plunging. The collapse in the JPY-crosses spilled into the USD pairs, triggering stop loss selling of the non-JPY dollar pairs (EUR/USD, GBP/USD, and AUD/USD, buying of USD/CAD). In other words, only an abrupt market dislocation sparked USD-buying, which only serves to highlight the lack of support for the USD from any fundamental source. Full text »
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