Monday 10th March 2008

Surprisingly weak February NFP number released last Friday and a surprise $100 billion plus liquidity injection from the Fed. But the US economy is expected to continue to weaken and the Fed may have to continue to keep cutting rates.

The market saw some brief profit taking on short dollar positions late Friday but overnight the US currency has slipped back towards a record low against the Euro and an 8 year low against the Yen.

Concerns about a US recession and the subprime mortgage crisis as well as the outlook over interest rate differentials are likely to keep the dollar under pressure. Meanwhile the ECB keeps is refinancing rate at 4 per cent, citing rising inflation pressures and last Thursday upwardly revised its inflation forecasts.

So despite the market now being well short dollars it looks like we will see more of the same for now. Money management rules!