Thursday, June 22, 2006

 

Fed Rumors Boost The Greenback

Rumors on Wall Street boosted the US dollar today. "Gold and other metals weakened Thursday, as the dollar rose overnight and market players remained cautious ahead of the Federal Reserve's rate-setting meeting next week."

"Gold for August delivery finished down $5.60, or 1%, to close at $585.40 an ounce. Among other metals, silver for July delivery dropped 21 cents, or 2%, to $10.21 an ounce."

"Jobless claims have been trending lower over the past three weeks, and the next report in a week will coincide with the Fed's decision on rates and its comments about the outlook for monetary policy. 'A fourth low reading could influence the decision to tilt toward a more hawkish policy statement,' writes Crescenzi. It 'would also lead some to speculate that the Fed might deliver a 50-basis-point hike at the meeting,' he adds."

"The Canadian dollar fell hard against a stronger U.S. currency on Thursday, giving back the previous day's gains as market players mulled an uncertain Bank of Canada interest rate outlook. Bond prices retreated roughly in line with U.S. treasuries."

"The currency finished at C$1.1189 to the U.S. dollar, or 89.37 U.S. cents, down from C$1.1092 to the U.S. dollar, or 90.16 U.S. cents, at Wednesday's close."

"Comments on Wednesday by Governor David Dodge, suggesting that an eighth-straight rate hike is not a sure thing, sparked a late day selloff that continued on Thursday. '(The weakness) is on the back of the interpretation of Dodge's comments, which could be taken in a multitude of ways,' said trader Ted Gould."

"The shift in Canadian rate sentiment has come suddenly. Many economists have changed their tune over the past week, with some now expecting two more rate hikes, particularly as U.S. rates seem set to continue rising."

Comments:
I saw several rumor pieces in the press this afternoon regarding a half point rate hike next week. Actually, gold held up well, technically. It could have easily broke down $30 or more, but held in there. It will be interesting to see what happens if the fed only does a quarter point raise.
 
Talk is cheap. BB won't surprise the stock market. He sticks to the script.
 
contrary to popular belief, gold can rise in the face of rising interest rates. when you think of how many trillions of dollars is traded each day, gold assests are, in total, less than $200 billion.

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