Obama plans is what is driving the stock market downward

Foreign Exchange - Currency Outlook

We get the service sector PMI for the US today, presumably to show a similar contraction as the eurozone and at a fast clip. The Bloomberg survey gets a reading of 41 after 42.9 in Jan.

So what?

Do we not already know that the economy is contracting?

Far more important is how markets intend to deal with payrolls on Friday, and today, how they will respond to the new TALF news and other aspects of government initiatives. The political opposition continues to say that the Obama crowd is going about it all wrong and that lack of confidence in the Obama plans is what is driving the stock market downward. Even the normally sane Cramer asserted this idea. Obama responded badly, saying stocks markets gyrate but he is on a long-term path. Just one little comment to the effect that he is trying to restore free market capitalism (with tighter regulation) would have done the trick and changed the dialogue. Not saying it makes some people think he’s a pinko or a closet Commie.

Europeans sigh when they see this, but to be fair, Europeans like rigged markets.

Is it possible that market players are being overly influenced by the reporting?

Yes.

Instead of looking at earnings trends and other hard data, equity traders are obsessing about whether this plan or that plan fits in with some 10th-grade idea of "capitalism." It’s all a waste of time (like a lot of politics). Keynes was right and the Republicans are wrong. That doesn,t mean the current government is taking all the right actions or that the actions will work. It does mean that "expectations" are being skewed by ideology, and that is never a good thing. At some point this contentiousness may be a US dollar negative. Other dollar negatives are lurking in the shrubbery, including a possible rise in the price of oil, a political event, a terrorist act, etc.

We are a trend-follower and the US dollar trend favors additional gains, but it’s going to be an ordeal.

Pounds to US Dollars = 1.4000
Pounds to Euros = 1.1175
Euro to Pounds = 0.8940
Pounds to Australian Dollars = 2.1901

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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