U.S. Facing Headwinds Jan. 31/08

Forexmentor.com Forex Trading Price Action

With the Fed slashing the federal funds rate in order to deal with the credit crunch and housing deflation, tame the recession, and rejuvenate the economy, the caveats are the willingness of the banks to lend, and consumers and businesses wanting to borrow. The funds target could very well end up in the low twos, if not one per cent.

A weak U.S. dollar has given rise to a strengthening Canadian dollar, and soaring gold prices. But, that could all change for the greenback later this year. The greenback could get its legs back, once the ECB lowers interest rates in response to a slowing economy.

The loonie has garnered renewed interest, albeit not very convincing, due to U.S. dollar weakness, higher central bank rates in Canada, and a decline in risk aversion in the financial markets. Any market weakness could see loonie bulls run for cover.

–Peter
forexmentor.com

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