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Current expectations for September, 2010

Expectations in short for September -
Dollar - down
Gold - down
Stock markets - up

Last week the FED again has reassured the markets it will continue its monetary policy of easy money in order to stimulate consumer spending and get US out of the trap. The FED discount rate can hardly be any lower but Bernanke said they will try to communicate clearer that this rate could last longer than the market participants has expected ("Bernanke said Friday the FOMC would consider modifying the language to communicate to investors that it plans to keep the federal funds rate low for a longer period than is currently priced in markets." source Marketwatch ). At the same time the chairman said they will continue to buy back Treasurys. An additional result from such actions could be lowering the US government debt.

This alone will give enough strength to the Euro to continue its advance as there will be expectations of increasing the amount of available Dollars on the market. A series of positive news from Europe (as a result from the weaker Euro in the previous months giving the European companies the needed competitive advantage) could also boost the demand for Euros. The weaker Dollar will give more competitive strength to US companies and further improve their financial results. As a secondary effect the Crude oil value could increase.

On the other hand such stimulus money (or any other type of government support) would give markets the long awaited trigger to start trading positive expectations again.

A sidenote on the Unemployment in USA and in the world in general: This is one of the last indicators that will change. The employment level is a result from the good or bad decisions in governing the economy and not their reason. On the first hand businesses get optimized, reorganized as to inventories and human resources and only after that they start to employ new workers and that is only if they are needed for the future productivity.

As markets turn positive using Gold as a hedging vehicle would become less popular. Having a big enough drop in demand of Gold would pretty much turn the tide. A considerable drop in Gold price would scare most of the last crowd that entered the Gold market in hope to make some quick profits which would increase the selling pressure further.

All these are an expression of an analytic point of view. Will wait for the end of September to compare with the real data.

Disclosure: No positions

Disclosure: "No positions"