The Big Debate Is On:
It's all about where growth is going
That's gonna be the focus for what the Fed is gonna do. The credibility of Bernanke is on the line here. The Fed expects growth to be at a "moderate level", but with this week's manufacturing numbers, what's the outlook now for future growth?
One Fed govenor has already spoken about this and he's making a fair point-you can't judge the economy on 1 or 2 numbers manufacturing numbers, when manufacturing is about 12% of GDP. There are other manufacturing areas that do show growth. Core inflation is still above where they want it to be. Here's a quote from the article:
"Plosser, a non-voting member of the Federal Open Market Committee this year, said in a Nov. 28 speech that the economy is ``performing fairly well'' outside of housing and will probably rebound from the third quarter, when it expanded the least this year. Growth will return toward a 3 percent annual growth pace next year, he said. Plosser reiterated that outlook today".
``If that's the case, I'm still worried about inflation,'' Plosser told reporters today.
The Fed's point is that growth is gonna bottom out in the 3rd quarter, be moderate, then return to more normal levels later in 2007. If that plays out, then inflation likely remains a concern. But here's what's important for you as a currency trader; the opposite likely holds true as well. As growth gets weaker (if that happens) inflation becomes less of a concern. The $ weakens.
So there are a lot of factors weighing on the $ now, but growth and it's projected direction weigh heaviest. The final 3rd quarter GDP revision is likely to be lower and that could get priced in. Greater expectations of a March and beyond rate cut. Our desire for $ weakening based on problems with China and the current account. But if ever there was a green light for $ weakness-this one certainly would be up here with the brightest:
Plosser also told reporters that ``I don't view inflation pressures coming from a declining dollar.''
Hey if you're gonna trade on the basis of a couple of weeks, u gotta look at this and take a pretty good guess about where the $ is going. Does that mean your position will go straight to profit? No. Could you see a 100 pip or more drawdown if you were to buy right now? Sure. But I fell certain that there's another 200 to 400 points available in the GBP here. If you have the chutspa to stay with it...go for it. If 30 pips is gonna cause you to tear your hair out, then stay away. But if you manage your account so that 80 pips or so only represents about 2-3% of your acount-you'll be good to go. You can always buy more when you're profitable.
It's all about where growth is going
That's gonna be the focus for what the Fed is gonna do. The credibility of Bernanke is on the line here. The Fed expects growth to be at a "moderate level", but with this week's manufacturing numbers, what's the outlook now for future growth?
One Fed govenor has already spoken about this and he's making a fair point-you can't judge the economy on 1 or 2 numbers manufacturing numbers, when manufacturing is about 12% of GDP. There are other manufacturing areas that do show growth. Core inflation is still above where they want it to be. Here's a quote from the article:
"Plosser, a non-voting member of the Federal Open Market Committee this year, said in a Nov. 28 speech that the economy is ``performing fairly well'' outside of housing and will probably rebound from the third quarter, when it expanded the least this year. Growth will return toward a 3 percent annual growth pace next year, he said. Plosser reiterated that outlook today".
``If that's the case, I'm still worried about inflation,'' Plosser told reporters today.
The Fed's point is that growth is gonna bottom out in the 3rd quarter, be moderate, then return to more normal levels later in 2007. If that plays out, then inflation likely remains a concern. But here's what's important for you as a currency trader; the opposite likely holds true as well. As growth gets weaker (if that happens) inflation becomes less of a concern. The $ weakens.
So there are a lot of factors weighing on the $ now, but growth and it's projected direction weigh heaviest. The final 3rd quarter GDP revision is likely to be lower and that could get priced in. Greater expectations of a March and beyond rate cut. Our desire for $ weakening based on problems with China and the current account. But if ever there was a green light for $ weakness-this one certainly would be up here with the brightest:
Plosser also told reporters that ``I don't view inflation pressures coming from a declining dollar.''
Hey if you're gonna trade on the basis of a couple of weeks, u gotta look at this and take a pretty good guess about where the $ is going. Does that mean your position will go straight to profit? No. Could you see a 100 pip or more drawdown if you were to buy right now? Sure. But I fell certain that there's another 200 to 400 points available in the GBP here. If you have the chutspa to stay with it...go for it. If 30 pips is gonna cause you to tear your hair out, then stay away. But if you manage your account so that 80 pips or so only represents about 2-3% of your acount-you'll be good to go. You can always buy more when you're profitable.
