Rate Rumors Rally Greenback
Currency markets had their first chance to respond to
ex-Federal Reserve governor Wayne Angell’s comments made late Friday that there
is a 60% chance the Fed will cut interest rates this week, nearly one month
before the monetary policy board’s regularly scheduled meeting in March.
March dollar index futures
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PowerRating) have rallied more than $1 on
the session on Angell’s speculation and erased much of the loss sustained Friday
as stock indexes touched down to two-year lows. The chance for a recovery in the
stock market is seen as dollar-positive, but only for the short-term.Â
Advances in the dollar–and the corresponding declines in
euro FX
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PowerRating),
Swiss franc
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PowerRating) and British pound
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PowerRating) futures–are
limited as traders shift their focus back to interest rate differentials between
the US and Europe. Lower interest rates in the US would make holding
dollar-denominated assets relatively less attractive than holding
euro-denominated assets.Â
The July Fed Funds futures contract
(
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PowerRating) is
rallying to new highs and is pricing in an 80% chance of another 100-basis-point
(1%) cut by the Fed’s June meeting. If a cut of this magnitude were to occur,
the easing would bring (short-term) US and German rates to within one percentage
point of each other, undermining the dollar’s allure.Â
From the Implosion-5 List,
cocoa
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PowerRating) gapped lower after leaving an engulfing bar and
closing below the mid-line of the engulfing bar in the past two day’s action.
The May contract is trading down 8 at 1117.Â
Also from the Implosion-5
and Pullback From Lows
lists, the soybean complex remains poised at lows after Friday’s gaps to new
six-month lows.