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FOMC philosophies - post your opnions here

  • #1
  • First Post: Dec 11, 2007 1:34pm Dec 11, 2007 1:34pm
This thread is intended as a place to share your personal interpretations on the FOMC rate cut, and why you think the market reacts to it in a certain way.
  • #2
  • Dec 11, 2007 1:40pm Dec 11, 2007 1:40pm
Personally, I am surprised that players responded to the rate cut by going long on the dollar. To me, the move is proof that the Fed is in a reactive mode. All this is too little, too late. 2008 is gonna be a drag.

Last time they said "we're not worried, all is in balance," and now this about-turn.

The market's reaction to me sounds like people are thinking "oh, good, they're going to help the economy grow".

I didn't trade this time because the European session was already incomprehensible to me. now I am glad I didn't.
  • #3
  • Dec 11, 2007 1:56pm Dec 11, 2007 1:56pm
actually I think that people do believe that US is going in to a recession. If you think about it, carry trade gets messed up only when US economy is messed up. DOW sucked today because people were worred FEd will not cut enough rates. The feeling was a 0.5 rate cut would save the economy from recession...but a .25 one may not. Hence it means US economy is going in to mild recession which means carry trade ends now.,
  • #4
  • Edited 5:48pm Dec 11, 2007 4:51pm | Edited 5:48pm
I believe the initial strengthening of the USD in the GBP, Euro , NZD etc was a result of the liquidation of the JPY carry trades (probably banks bailing out) and the consequent strenghthening of the Yen. I used it as an opportunity to go long the EURO/USD and NZD/USD. When Tokyo opens tonight if there is more carry trade liquidation the same thing may happen. Just a thought.

update; The NZD/USD is moving up nicely maybe another shot at it tonight
  • #5
  • Dec 11, 2007 5:49pm Dec 11, 2007 5:49pm
Quote
xxfunguyxxactually I think that people do believe that US is going in to a recession. If you think about it, carry trade gets messed up only when US economy is messed up. DOW sucked today because people were worred FEd will not cut enough rates. The feeling was a 0.5 rate cut would save the economy from recession...but a .25 one may not. Hence it means US economy is going in to mild recession which means carry trade ends now.,

I agree, I think they made a weak move with the idea that they can just cut more at the end of January if they need to. I think this will be way too late. I wouldn't be surprised to see an inter-meeting cut. Bernanke must have seen the head and shoulders on the weekly GBP/JPY and thought he'd help it out.
  • #6
  • Dec 12, 2007 3:15am Dec 12, 2007 3:15am
I think the dollar pairs have a lot of dollar negatives already priced into them. Regarding the U-Turn. Often Central Bank chiefs often do not accurately predict the future economic conditions. There are just too many unknown variables. For example, many did not expect oil to rise so much in Q4 of 2007.
  • #7
  • Last Post: Dec 12, 2007 4:37am Dec 12, 2007 4:37am
Yen carry trade price action looks like a drunk stagering around this morning.
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