Morning Run…June 25, 2009

The 2-day Fed meeting resulted in a fairly lackluster event with one exception.  The Fed’s statement on inflation was a bit different.  And the bond market interpreted the message as slightly more hawkish on inflation.  I would not be surprised, however, to see the move in interest rates yesterday reversed.  Below are the excerpts on the reference to price pressures in yesterday’s statement compared to the statement made after the last Fed meeting…far from a clear move beyond deflation worries.

Currency markets have been very choppy over the course of the last week.  Critical trend breaks in stocks, commodities and currencies took place last week implying an aversion to risk is coming back into play—and these key breaks still hold.  Though, particularly in the pound, sharp sell-offs in currencies have been met with equally strong buying over the past several days, creating a whipsaw back and forth.  Approaching the Fed announcement, however, the dollar started its move higher and continued its move higher following the announcement.  Bolstering this trajectory, yesterday the Swiss National Bank intervened selling Swiss francs against the euro.  This boosted the dollar nearly 4% higher against the Swissie. 

                                                Key Charts

The pound has lagged the trend break that has taken place in stocks, commodities and other major currencies and is now testing this trendline as well.  The challenge of this trendline will be key to watch.

And USDJPY looks to have made a false break of this wedge formation gaining with general dollar strength and helped along earlier today from dollar supportive comments from the Japanese Finance Minister.  This formation implies that USDJPY is preparing for a breakout or breakdown.