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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (456)	2/23/2004 8:29:32 AM
From: gregor_us	Read Replies (1) \| Respond to of 116555

Mish: A Monetary Conditions Index, Which Has Been used by various central banks over time to guide their overall Mandate--like the Reserve Bank of New Zealand, which used a MCI until a few years ago--holds that a strongly rising currency "tightens" monetary conditions. You have made a very good call regarding Eurodollars, taking the basic position that the ECB would cut--or be forced to cut--and at least would never raise. I have had my own views about that particular bet--which no doubt differ from yours. Essentially, the rising Euro which has now gone way, way past its lows has backed the ECB into a corner, as it has watched money "get too tight." Add to that the fact that the gargantuan Asia Currency/USD equation works against Europe on many different fronts--and you begin to see the ECB cutting rates not only in desperation--but as a form of retaliation. A lower Euro takes the pressure off the need to cut by the ECB--which presumeably takes any extra juice and jumpy energy out of those contracts that you are holding. I predict the Euro will rise again as the market grows frustrated again in its search for vehicles through which to bail, from the USD. The ECB in my view will be forced to cut because a Euro above 1.30 is like a Rate Rise and I think also they are soon going to become very angry about the Yen/USD Scam. Should be fun to watch, when it happens.