Wednesday, December 16, 2009
DOLLAR & OIL
The FOMC stated that economic activity has continued to pick up and that deterioration in the labor market is abating. The FOMC also expressed that conditions in the financial markets are improving, so some of the Fed's special liquidity facilities will soon end as planned. The Fed also indicated that the target range for the federal funds rate will remain at 0.00% to 0.25% and that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. The overall language in the statement is consistent with previous statements, so it helped calm concerns that the Fed may look to raise interest rates sooner than later.
Despite that, the dollar advanced against competing currencies and gave the Dollar Index ($USD) a momentary gain. I found today's action interesting, we had the dollar dip and then rally back, while gold, silver and oil put in gains for the day. Most likely due to the FOMC statement, which was supportive for the dollar and while also dovish- signaling continued money flow.
I'm still holding onto the dollar going to 78 and gold to $1075 near term. Oil, which I've stated is lagging golds move and appears to have started its run. I'm in the same camp as Larry Kudlow, that inflation is picking up. I also believe the fed is behind the curve.
Back to the energy markets, OPEC meets next Tuesday >>READ...
the Organization of Petroleum Exporting Countries said it expected the world would consume 70,000 barrels more crude next year than previous estimates. The group, which supplies about 35 percent of the world’s crude, said developing nations would drive demand up.
I continue to favor energy near term, especially the drillers Transocean (RIG) & Pride Int'l (PDE).
*click chart to expand image