IntegrityFX - A New Kind of FOMC - 01/27/2009
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A New Kind of FOMC
by David Leal, Market Analyst - 01/27/2009
Today was the first of a two day FOMC meeting. This meeting is without a doubt very different from any that they have ever held. With interest rates at all but zero, it would seem that the normal topic of discussion has now become a non issue. So the committee must now focus its attention on new matters.
The biggest issue that the market is concerned with is the purchase of Treasuries. Will the Fed purchase treasuries if demand in the private sector dies off? Should the government rely on the fed to finance its spending, the dollar would no doubt begin to lose strength (beyond that of the reduced demand for treasuries).
The markets will also be listening for any dollar rhetoric by Bernanke. After hearing Geithner's own apparent strong dollar bias (despite what his actions may imply), the market will be anxious to see if the Fed will follow the Treasury's lead.
However since there will be no interest rate change, without any dollar positive rhetoric, there is a strong risk if dollar weakness resulting from the FOMC statement tomorrow. Equities have been quiet so far this week so look for a breakout of this week's range.
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David Leal
Market Analyst
DLeal@IntegrityFX.com
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