Bank of New Zealand and Canada to cut interest rates

Foreign Exchange Outlook : We have yet to get an “October surprise,” the attention-grabbing Event manufactured specifically to influence the election. Perhaps conditions are so bad today that collectively they are the October surprise. Or perhaps in a few days we will get another tape from Osama bin Laden, who sent one four days before the 2004 election.

Even without a terrorist event, we have plenty of potential surprises. Today we get the Conference Board leading indicators, and we know it will be dismal. Bernanke testifies to the House Budget Committee on the US economic recovery. Recovery? We can’t talk about recovery until we have hit bottom, can we? Tomorrow we get the Bank of Canada (and Reserve Bank of New Zealand) rate decision. Canada is seen cutting 50 bp and New Zealand to cut interest rates 100 bp. These are smaller economies but probably in the forefront of more cuts to come until there’s nothing left for savers at all, exactly as occurred in Japan.

We have far too much information in the world today. Nobody can digest it all. It’s tempting to forget about the world of finance and just watch the increasingly lurid soap opera of the US presidential election. But some things stand out-if Iceland really did commit a sovereign default, it doesn’t matter that it’s a tiny country with fewer people than a Manhattan block of apartment buildings. It’s the way of the market to ask "Who’s next?" and then try to get a self-fulfilling prophecy. Hungary? Ukraine? Russia itself? All the fine talk of “recovery” is PR smoke.

There can be no recovery until all the damaged planes have crashed.

We are not there yet.

Still to come are regional US banks that the Feds won't save, among other disasters. All in all, this is awful stuff but good for the US dollar exchange rate.

Buy for Now

Barbara Rockefeller
Forex Trading Reports

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