Unemployment and Consumer Debt:The 800 lb Gorilla in the Room
By Mike Meyer
10/21/10 St. Louis, Missouri – When I left you Tuesday morning, the currencies were hanging on, but as Chuck explained yesterday, we saw a considerable sell-off in response to the rate increase from China as the day wore on. The euro (EUR) had briefly dipped into the 1.36 handle and the dollar index rallied the most in two months. It looks as though this was just a knee-jerk reaction as we opened yesterday morning with the euro in the mid 1.38 handle and rose all the way up to 1.3991. It was as if Tuesday was gone with the wind, like it never happened.
I can hear you asking yourself, “What’s the deal?”… Why did the currencies snap right back into place like a rubber band? Well that tug of war I was talking about between the two quantitative easing camps pulled back the other way and traders became focused on the Fed’s Beige Book. There was another economic firm that came out and said the magnitude of QE will be more than what is currently expected so that sent the dollar bulls back into time out, at least for now.