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by Ashraf Laidi
Posted: Feb 22, 2010 5:00
Comments: 2338
Forum Topic:

USD

Discuss USD
 
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DaveO
N.Cornwall, UK
Posts: 5733
13 years ago
Apr 4, 2011 21:22
yep agree Gunjack, that is until such time as the bond mkts worry about sovereign default, perish the thought !
Gunjack
London, UK
Posts: 1184
13 years ago
Apr 4, 2011 21:18
FED will not hike rates any time soon. US deficit is around 14 trillion give or take. Any rise in rates would see annual interest payments on the federal debt reach an unimaginable level leading to a potential default making the USD worthless...Expect a Japan like scenario of perpetually low rates
DaveO
N.Cornwall, UK
Posts: 5733
13 years ago
Apr 4, 2011 21:17
And the trouble with depreciating pound and euro is it would intensify the effects of inflation to respective countries. Seems to me there is a balance between competitivity on exports and minimising the effects of external inflationary forces.
DaveO
N.Cornwall, UK
Posts: 5733
13 years ago
Apr 4, 2011 21:13
To my knowledge there is no question of Fed hiking. They have other tools in their armoury first. Also, refer to Bernanke 1997 study re oil spikes.
rim
Turkey
Posts: 121
13 years ago
Apr 4, 2011 21:05
Whether ECB or BOE hike , the situation ,is same in USA the unemployment ,FED only afraid of unemployment will not be decreased if they hike earlier , so consider the situation in Europe , in Spain unemployment around &20 ,

If ECB or BOE hike the rates then it will be an historical mistake , too early now ,in order to fight unemployment they both should depreciate the GBP and EURO since Euro opposite of DXY means commodity value currency ,the price stabilization may be achievied only by apreciation of DXY
Sir Ignore
United States
Posts: 3068
13 years ago
Apr 4, 2011 19:56
bs..cat..market doesn't think thru that...sentiment moves it higher and more int. dosh..dat be what a market iz..
cat0nip
Frankfurt, Germany
Posts: 1632
13 years ago
Apr 4, 2011 17:45
Yet ECB will hike because in the longer run ECB will be considered untrustworthy ( it is not trustworthy anyway) if they don't.
DaveO
N.Cornwall, UK
Posts: 5733
13 years ago
Apr 4, 2011 17:41
ok catnip, you may be right. I was just thinking along lines Trichet has talked mkt into expecting 25bp hike and eur has rallied accordingly every time Trichet sounded hawkish.
cat0nip
Frankfurt, Germany
Posts: 1632
13 years ago
Apr 4, 2011 17:32
Not agreed. If ECB does not hike EUR strengthens considerably. It is easy to figure out that even a 25bp hike causes large problems for Ezone banks because ( unlike in US) Ezone banks are major holders of troubled bonds. To counter the effect ECB must "print" even more liquidity to prevent undercapitalized banks from default. Thus a rate hike
a: does not reduce inflation
b: increases M3
c weakens Euro

Thus my bet is after ECB rate decision assumed 25bp hike short EURUSD around the peak 1.43
DaveO
UK
Posted Anonymously
13 years ago
Apr 4, 2011 17:10
A sharp sell off for eur would likely see DX strength in the short term
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