Tuesday, September 1, 2009

Sentiment Beginning To Line Up Behind Dollar

"We think Friday was a bit of a watershed moment, if we can call it that," said Greg Salvaggio, vice president at Tempus Consulting in Washington.
Salvaggio said news on Friday the U.S. economy lost only 247,000 jobs in July, below the 275,000 expected by economists, was a continuation of a narrative that first surfaced in July, the narrative about the U.S. economy emerging from recession more quickly than its counterparts in the G7 group of major advanced economies.
Other recent data points have been consistent with that narrative, he added.
The Fed's policy meeting this week marks another key chapter in the unfolding story of U.S. recovery, and the focus is now moving to the Fed to see if it provides more support for it.
"While no one thinks that the Fed is going to shift interest rates higher, what a lot of people are looking for is some indication in the language of their statement of an ending of the program of quantitative easing and excessive stimulus in the economy," Salvaggio said.
If the Fed doesn't provide such an indication, it won't undermine the narrative of U.S. recovery, but it will slow the pace of the dollar's acceleration, he said.
"Should that wording emerge, I think you're going to see people quickly run for the exits on short dollar positions," he said.

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