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Daily Market Commentary

The debate continues this morning about the substance of the Fed statement yesterday.  Did they completely remove their tightening bias?  One thing is for sure, of the two things the Fed is paid to worry about (inflation and economic growth), they are still more concerned about the inflation component.  That said, economy is now on the radar screen and the market took the statement as a bullish indicator.  The chances of a Fed rate hike have fallen substantially, as the Fed has left the door open for cuts later in the year.  Fed Funds futures are now pricing in a cut around the August or September meeting.

 

 

The divergence in the expectations between the Fed Funds and BoC overnight rate has really put a bid on the CAD$ vs. the US$.  However, the pressure has come from selling the greenback, as all majors and most minors are trading higher.  Bonds, however, are realizing the reality that they were already predicting what Bernanke and co. came out and said, and yesterday's gains have been erased.

 

 

 



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