Archived IMT (2008.10.06)

RFLATIONARY TRADE: The fact that gold prices have gained $30 to $861 per oz despite the dollars rally and oils tumble below $90 per barrel reflects credit markets anticipation of the global reflationary trade, which would be triggered by a new bout of central bank easing. The currency impact of such a move would be beneficial for the US dollar at the expense of European currencies on the argument that rate cuts overseas may have more to go. rate cuts would unleash sharp rallies in AUDJPY, EURJPY, NZDJPY, and to a lesser extent a boost in USDJPY. Fed funds futures now pricing 80% chance of 50-bps cut in October meeting, but I expect the Fed to move as early as this week.