If Europe wises up and announces a coordinated plan, however bad, the euro carnage could stop

Foreign Exchange Rate Outlook : Trichet gives a speech this morning, but all eyes are on Bernanke, who will report on the economic outlook (12:30 pm ET) to the National Association of Business Economists in Washington. G7 meets Friday in Washington. European finance ministers are meeting in Luxembourg today. As we have noted before, an institutional development can always trump the trend. If Europe wises up and announces a coordinated plan, however bad, the euro carnage could stop. What’s really strange is to see the euro exchange rate falls so far against the Japanese yen, when Japan really has very little to recommend it except a banking sector not in crisis.

Something will happen to halt this move, although nobody can say what it is just yet. Maybe regulators will close the stock exchanges, although that’s a third-world kind of action (take three
times yesterday in Brazil). Perhaps the Europeans will come up with something that looks like a plan, even if it isn’t. Britain seems to be a half–step ahead of Europe institutionally but facing a potential interest rate cut this week. The US Treasury needs to get started right away on using it’s $350 billion to unclog arteries. If the credit and liquidity crisis go on into next week, recession will be the least of our worries. We are an intermittent gold bug—and this is one of those times. It’s a weird but understandable to support the case for a stronger dollar exchange rate as the same time we think we see gold going higher, too. They are both safe havens today.

It would be nice to see the famous inverse correlation take a hit to the jaw.

Bye For Now

Barbara Rockefeller - Forex Trading Reports

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