Look, Europe's problem is not only that the dollar is falling, but that the White House, whatever it says, wants it to fall â to protect US competitiveness and ease America's massive external deficit. But that dollar decline is very uneven â with the greenback falling disproportionately against free-floating currencies like the euro, while remaining static against the so-called "dollar bloc", including China, the big oil exporters and other emerging markets with dollar currency pegs. That's why European exporters are suffering unduly from the dollar's plunge. No wonder EU finance ministers were spitting bullets at the International Monetary Fund meeting last week, when they failed in their bid to register an official protest about America's "benign neglect" dollar policy. So look for gold and oil to go higher higher higher for now and expect the rate to be 4.50% after Wednesday.
one other point would be that the US Dollar is too cheap now so that the stock market wouldn't crash and cause even more trouble....
Why is everyone anticipating a 50BP cut on Wednesday... No rate cut the market falls .25 rate cut is ALREADY priced into this market, A 50bp is just because the bulls on wallstreet have no other catalyst at this moment to keep the momentum going for this already tired bull market. A 50 BP cut will cause major bubbles in other asset classes, right now may be all fine for stocks to move higer on this anticipated 50 BP cut, but in the long term it will be a negative. The best bet now is to cut a maximum .25 basis point and leave it alone till early 2008.
But then you've got folks like Junker out there screaming about how a strong Euro is what they (he) want(s). So what's that tell you about your analysis?
Fed does nothing/raises:Market will rally as it means Credit crunch is tamed. Fed cuts .25:Market will rally on potential for more cuts and if only a .25 cut means credit crunch is abating. Fed cuts:.50 market will rally but then may retrace when people start wondering why another .50 bp cut was necessary. This last is the most bearish move the Fed could make looking beyond the post announcement hour/day. My play is long with rock solid defined risk (don't do a marketsurfer and get caught in a move the wrong way for 200 points!)
Bring out the Flag Let's here y'all - 'U.S.A - U.S.A - U.S.A - U.S.A - U.S.A' There, feeling better already aren't we See, that's all it takes to pacify the majority.