ONE-TWENTY TWO: Trading Financial Markets
Exploring the poetry in financial markets for students of money and economy since the year 2000.
For most of this year, I have interpreted the Federal Reserve’s policy to maintain “exceptionally low levels of the federal funds rate for an extended period” as the equivalent of low rates for at least the next six months from each new confirmation. This interpretation came from a January interview with New York Federal Reserve … Read more
A catalyst for working off the market’s over-extended and over-bought conditions remains elusive. The Federal Reserve’s latest monetary policy statement essentially blessed the market’s stubborn “melt-up.” The statement did not provide the incremental “hawkishness” as I was expecting given last month’s surprise discount rate hike. In fact, this statement’s reference to low rates for an … Read more
(A version of this post also appears on Inflation Watch) The Federal Reserve essentially warned us in its most recent written testimony to the House of Representatives that part of its exit strategy from emergency monetary measures is to increase the spread between the funds rate and the discount rate. This evening, the Fed did … Read more
Good (or not as bad as expected) economic news has typically garnered selling in the U.S. dollar and buying in the stock market. On Friday, the good news that November’s monthly change in U.S. non-farm payrolls came in essentially flat sent the S&P 500 soaring as high as 1.7%. However, the dollar index also soared, … Read more
Now that major markets worldwide have completely recovered from the Dubai debacle of last week, it is easy to consider this episode just another blip on the way to eternal bliss. Not even the U.S. dollar could sustain more than a mirage of strength on this “temporary crisis” (I had thought that even after the … Read more
Probably one of the longest running jokes in the financial markets is the amount of time U.S. officials spend talking about their support for a strong dollar while taking no action to actually support a stronger currency. On Monday, Federal Reserve Chairman Ben Bernanke made a rare contribution to the bluster by stating his own … Read more
Last week I decided to short the pound vs the U.S. dollar despite the fact that the relief rally I expect in the dollar had not yet begun. One week later, there remains no relief in sight for the dollar, but the pound has fared even worse. I am of course grateful that I chose … Read more
Last week, there was talk that the Bank of England would implement negative interest rates. I was all set to begin shorting the Pound (mainly versus the U.S. dollar), but the BoE simply maintained interest rates, made no changes to its quantitative easing program, and had nothing new to say. The Pound lifted in “relief”, … Read more