The Fed is getting punished by the FX and energy markets for not increasing rates by 50 bps because Mr. Bernanke didn't back his anti-inflation discourse with action. I'm glad to see bonds going up today because I plan on pulling the trigger very soon. They should resume their down trend early next week when the inflation risk premium on long term bonds starts to increase again.
The market sell off preceding the fed announcment was to keep him from raising 50 basis points and it worked. He is weak, our asian pawn brokers see right thru him.
Stocks were very oversold and had strong support/protection so they would have been able to take the 50 bps blow and shortly after celebrate the decline in oil prices that we would have seen. We saw strong support the day they bounced back when a bad CPI report was released. There were no more bears left at that level (the level that preceded the CPI report). I also think there was weakness from Bernanke's part. He had been victim of what I consider to be unjustified criticism from the press and from a senator that was opposed to his nomination. He was afraid of being blamed for another stock market dip, even if prices would be much higher shortly after, with lower oil prices.
Steve perfect analysis. My first reaction last Thursday after the Fed's 25bp move was that Bernake is spineless and he will pay for this spinelessness. I've always believed that the Fed Governor after Greenspan would have a mess.
$ weakness against the euro will track the ECB's rate hikes, to be followed by Japan's BOJ hiking. Once language is released suggesting a pause, that's it for the buck. I think it runs back to 1.25, poss 1.20 while we are waiting through. Nice buying opportunity...
1.25 to 1.20? Hm... I don't think so. The rates will be paused soon since Bernanke will be pressured into doing so. While that's waiting to happen and ECB is in the cusp of raising rates, I see this going to 1.30 very very soon. Yen will race towards 110 once again.
maybe 1.30, maybe 1.25, but I sure don't see 1.20 anytime soon. The EUR/USD, as well as other pairs, seem confined to a range right now. I see the EUR/USD dipping to around 1.26 before resuming its climb. Or maybe it's just wishful thinking since I have a short NZD/USD.