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Boom & Bust


Some important macroeconomic activity next week that may embrace the potential USD rally thesis that the technicals suggest could be underway. Specifically of course the Fed meets next week (14th) to discuss the Fed Funds rate: markets are assuming a 25 bps increase in the fed funds rate; this after a slew of foreign central banks have decided not to raise their rates of late (in a somwhat surprising move). Japan and Germany also have important macro data releases next week that will give a sense of conditions there.

Given all the USD negatives that we and others have outlined over the last few quarters, how would the USD become an attractive currency? If other nations' economies became relatively weaker than the U.S.'s. Next week could provide some data points to suggest that that is just what is happening. Remember, the U.S. has been the world's lone growth engine for the last 5 years. If we sneeze, the rest of the world, particularly the far east, gets the flu. If the U.S. is indeed undergoing a slowdown (which almost all macro statistics are suggesting), then the effects of that slowdown would be multiplied for our trading partners.

Such are the dynamics of boom and bust.
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