I think you maybe overstating the Feds view of $ weakness. I didnt think we would get a cut to bail out the credit crunch bu the weakness that appears to be coming through the general economy may give Ben boy the opportunity he needs so he can cut and not look like he is giving in to the Wall Street bullies.
FF fuures are based on market expectation, but I do not think the market is right or better said I think they are premature.
Do they? If that's the case, don't you think they would have done something about it by now? Remember, this is the corporation that says there is no inflation... Falling dollar = higher commodity prices = more inflation... DO you think they will acknowledge this until prices are out of control?
Yes...and if they cut 25, you can make a quick 18BP by shorting the FFV... If they don't cut at all, FFV will collapse...
To the contrary, I think the dollar will actually rally. If the market knows the rate cut is coming, they will have positioned ahead of the cut. Dollars to be sold are being sold now. Gold and t-bonds will also fall the day of the announcement.
One possible scenario; Fed cuts its rate; and suddenly all these refineries back online; massive gasoline on the market to the anticipated slowing down economy and drives the oil price down; then inflation goes down as well. I still prefer not rate cut.
That's what makes horse races. Two differing opinions on cause and effect. I still strongly believe the Fed won't cut rates because it will collapse the dollar. That's just one Bob's opinion