Currency market says much about Bush’s presidency

Currency market says a lot of about Bush’s Presidency

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Fed holds the Fed Funds rate at 2% as expected

Wall Street soared Tuesday after the Federal Reserve left interest rates unchanged at 2% and assuaged some of the market’s fears about the economy. The Dow Jones industrial average shot up more than 330 points, and all the major indexes had gains approaching 3 percent. The next FOMC meeting is on September 16 and there is a 69.5 percent probability the Federal Reserve will leave rates unchanged, according to Fed Funds futures. The FOMC statement was less hawkish than expected.

After market hours, Whole Foods, Priceline and Cisco reported their Q2 earnings. Cisco beat the earnings expectations and stock edged up 7% in the extended hours trading. But Priceline and Whole Foods reported dissapointing numbers. While I think Cisco did great in the last quarter, I would put more emphasis on the earnings results of consumer stocks Priceline and Whole Foods. Consumer makes up 70% of U.S economy. Any sign of weakness in consumer spending (travel, food, retail etc) is a bad sign for the fundamentals of this economy. I still think we are going into a recession.

In other news, commodities plunged again as oil continue to break from its trend. U.S Dollar sold off on the Fed decision to hold rates.

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Argentina/Brazil to stop using USD in trade

With USD falling against major International currencies on a daily basis, it is not surprising to see news like this. Qatar and U.A.E are about to break their dollar pegs. China abandoned its dollar peg in 2005.

BUENOS AIRES, March 15 (Xinhua) - Argentina and Brazil are to scrap bilateral commercial transactions in U.S. dollars and start using their own currencies from August, an official in charge of currency settlement at the Argentine Central Bank.” The free ride for the US is soon to be over. Americans will have to get its fiscal policy in order soon, or they will suffer greatly.

Brazilian President Luiz Inacio Lula da Silva reached an agreement to establish a new payment system with his Argentine counterpart Cristina Fernandez de Kirchner during his visit to Argentina in February

http://news.xinhuanet.com/english/2008-03/16/content_7800121.htm

Brazil’s government imposed a 1.5% tax on foreign purchases of fixed-income securities denominated in reais, to assuage the currency’s rise.

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