I believe that when the dust settles on the fact that the Fed isn’t going to raise rates, things will have gotten so bad here that the Fed will be entertaining thoughts of cutting rates again!

The markets are riddled with confusion. And man what a difference a few days makes in the currency markets. So much has been happening, where do I even begin?

Come on, do you really believe the Fed is going to raise rates now, or in the near future with the economy teetering on the edge of a deep dark recession? Not a snowball’s chance in you know where! So, that leaves us with jawboning.

Big Ben signaled to the markets that he was ‘uncomfortable’ with the weakness of the dollar, and the ramifications that a weak dollar has on inflation. He actually blamed the weak dollar on inflation! Whoa there partner! You’re barking up the wrong tree!

There’s been a return to risk aversion overnight, as some news from the United Kingdom has reignited the fears that the banks may still be sitting on a ton of bad debt… Of course, as Pfennig readers, you already know this…

Yesterday, I left you with the thought that the London traders had been buying dollars since they arrived back from their three-day Holiday weekend. The U.S. traders did the same… And I believe profit taking was the order of the day.

The euro hit 1.5820 overnight in Asian trading, but has seen that move erased during the London trading session… I don’t know what the Londoners know that the Asians don’t with regard to euros.

I saw a report on the IFO’s correlation with the euro’s past moves to higher ground… Made sense to me, as strong IFO reports came out right before the euro moved past previous big figures…

I don’t know at this point if this is a true reversal of the dollar rally or a false dawn… But either way… Just to see some chinks in the dollar right about this time is probably a good thing to currency holders!

There’s no two ways about it folks. Inflation is a baaaaaaaaaddddddd thing… And I believe we will all rue the day that the Fed turned its back on inflation here in the United States. But Hey! That’s just me!