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Strategies & Market Trends : Aardvark Adventures -- Ignore unavailable to you. Want to Upgrade?

To: ~digs who wrote (475)	5/3/2004 7:03:27 PM
From: ~digs	Read Replies (1) \| Respond to of 7944

laidi goes on record ; forexnews.com ... We think the Fed should use this week's meeting as a stepping-stone towards a 25-bp rate hike in June. Failure to raise rates in June shall induce risks of being behind the curve in the face of a potentially strong June labor report (due in July 2 when there is no FOMC meeting) and in the face of a strong July labor report (due in August 6). Thus if the Fed stands pat in the June meeting, its next meeting won't be until August-two payroll reports later. Should those reports show strong job creation, the Fed will then have to tighten by 50-bps in August, which may appear to be too late.. ... Last week, currency markets moved from rewarding the dollar on the prospects of higher interest rates to frowning upon the currency on the possibility that the Fed may react too late to incipient inflationary pressures. Thus, the Fed must clearly communicate that it is ahead of the curve via showing its willingness to preempt inflationary pressures rather than to react to them. ... Markets will likely reward the dollar if the Fed's statement elevates expectations of a June rate hike. The Fed must upgrade its assessment for the economy, no longer recognize that deflation is a threat and drop its "patient" reference to accommodating policy. This should make for a rate hike signal designed at preempting inflation. ... A post-FOMC dollar sell-off will most likely develop in the event that the Fed maintains its patience in removing its accommodative policy because not only it delays higher dollar yields but also runs the risk of falling behind the inflation curve...