Coordinated Rate Cuts: Bullish for the Dollar?

The two main valuations of a currency pair are regional Forward Growth prospects and Interest Rate outlooks, and both, right now, are in turmoil as central banks look to correct the crisis of confidence. The fact that most regions cut rates at the same time will negate the interest rate side of a currency pair valuation in the near-term, and therefore it is left to forward growth prospects to pick up the slack.

That leads to the U.S. economy maybe coming out on top, and to the fact that it seems to be ready to do whatever it takes to instill confidence, and at any cost. That may lead to the dollar getting bought in the near-term; the fact that the economy is in a poor condition may be negated by the fact that that the other regions are entering a phase of unknowns, and the markets do not work well with unknown situations.

Out of adversity comes strength, and as misguided as some may feel it is, that strength may be near-term dollar positives. The cost of the constant flow of rescue packages is enormous, it is virtually incomprehensible as to the amount of debt that the U.S. is carrying right now, and over time that will weigh heavily on the economy, but for now the dollar buyers may just steal the day. If this set of rate cuts does not instigate equity buying, and the crisis of confidence continues, then we really may be in for a long period of range-bound trading.