One of the articles we're looking at is that foreign central banks are cutting holdings of U.S. Agency Debt by 7% this week. While equities have been great (with all the acquisitions), the greenback has been falling badly. This, along with concerns that the U.S. government may hurt mortgage bondholders by boosting home refinancing options, have caused foreign investors to reduce their holdings by about 57 billion.
In terms of commodities, wheat has been going up. Oil is up. Commodities Research Bureau and the other commodities indexes are all breaking out. US weakness has resumed. Dollar Index is around the 81 level, but cannot climb further up. Housing is weak as well.
Tomorrow is FOMC meeting. Investors are concerned about this because there might be monetary policy that will affect the dollar. Chances are the Pound and other commodity currencies will jump if nothing serious is changed (given the weakness of the dollar).
CPI has shown some inflationary signals, but is not good enough for the dollar (given that the government is wary of raising rates anytime soon).
Sentiment that if the Fed begins to hint at quantitative easing, it's not going to look good for the US dollar. QE, again is just printing money, which has incredibly negative effects on the dollar (as it did for the Yen). Obviously, if Fed raises the rates, it'll be good for the dollar. But first thing that will happen is the equity markets will tank.
So Fed is in an incredibly tough position right now. If it keeps its rates at this place, foreign governments will continue taking money out.
One of the other articles that we're looking over is that US Pensions are massively underfunded, and trying to forecast 8% returns despite only being invested in 6% long-term corporate bonds. The article asks where is the other 2% going to come from. However I will assume that they, like every other pension fund out there, believes that their investments will appreciate in value. However, the opposite could happen as well, so perhaps 4-8% is more accurate of a return.
Franc is going crazy right now. CAD is in danger of going down because of the weak CPI and its close correlation with the dollar. AUD is still trending higher based on good economic data and high interest rates.
Strong currencies: AUD/CAD/NZD
Weak currencies: USD/JPY/GBP
Unknown/Random: CHF/EUR
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