Vital Market Signs When the FOMC Met Previously
August 12, 2009
| EUR/$ | $/JPY | 10Y, % | DJIA | Oil, $ | |
| 06/30/04 | 1.2173 | 109.44 | 4.63 | 10396 | 37.95 |
| 06/30/05 | 1.2090 | 110.89 | 3.96 | 10370 | 57.00 |
| 06/29/06 | 1.2527 | 116.07 | 5.20 | 11077 | 73.41 |
| 06/28/07 | 1.3452 | 123.17 | 5.10 | 13456 | 69.82 |
| 08/07/07 | 1.3749 | 118.55 | 4.73 | 13510 | 72.27 |
| 09/18/07 | 1.3888 | 115.75 | 4.51 | 13475 | 81.42 |
| 10/31/07 | 1.4458 | 115.28 | 4.42 | 13873 | 93.59 |
| 12/11/07 | 1.4682 | 111.49 | 4.11 | 13645 | 89.78 |
| 01/30/08 | 1.4792 | 107.31 | 3.70 | 12454 | 91.70 |
| 03/18/08 | 1.5786 | 98.73 | 3.41 | 12257 | 107.53 |
| 04/30/08 | 1.5562 | 104.58 | 3.83 | 12953 | 111.54 |
| 06/25/08 | 1.5568 | 108.37 | 4.18 | 11837 | 133.62 |
| 08/05/08 | 1.5445 | 108.42 | 3.97 | 11484 | 119.82 |
| 09/16/08 | 1.4144 | 105.16 | 3.36 | 10936 | 91.18 |
| 10/08/08 | 1.3625 | 99.87 | 3.50 | 9447 | 87.02 |
| 10/29/08 | 1.2933 | 97.15 | 3.81 | 9145 | 67.38 |
| 12/16/08 | 1.3790 | 90.14 | 2.52 | 8687 | 44.14 |
| 01/28/09 | 1.3253 | 90.01 | 2.61 | 8356 | 42.92 |
| 03/18/09 | 1.3115 | 98.13 | 2.94 | 7340 | 47.73 |
| 04/29/09 | 1.3331 | 97.06 | 3.02 | 8194 | 51.05 |
| 06/24/09 | 1.3984 | 95.43 | 3.59 | 8373 | 68.76 |
| 08/12/09 | 1.4156 | 95.84 | 3.66 | 9241 | 69.67 |
Since the Federal Open Market Committee last met in June, stocks and the dollar have continued to move inversely with the DOW climbing 10.4% and the dollar losing 1.2% against the euro. The yen, another currency that sinks and rises with the ebb and flow of risk aversion, edged slid 0.4% on balance against dollar. Like dollar/yen, net movements in 10-year Treasury yields and oil prices have been inconsequential. None of these changes will exert much influence over the FOMC discussion. The Committee’s main tasks involve how to characterize the economy’s transition — has it moved beyond stabilizing to early recovery — and how much complacency to show about inflation. Despite a groundswell of concern that massive deficit spending and the Fed’s complicity in accommodating that stimulus, I expect the Fed to toe the line of other central banks that still consider downside price risks more prevalent than upside risks. There’s simply too much slack in labor and capital productive resources to think otherwise. The June statement predicted inflation would remain subdued “for some time.”
Finally, investors await to see what is said about any further improvement in financial market conditions, what is said about the central bank’s balance sheet, and whether changes are announced or hinted in any of the quantitative easing programs. The last expansion of these liquidity-enhancing schemes was announced after the March 18th meeting, when officials put limits of $1.25 trillion on mortgage-backed securities, $200 billion of agency bonds, and $300 billion of Treasury securities. Around 60% of such buying has already been done. The target range for the federal funds rate has been zero to 0.25% since the December meeting, and the June statement reiterated that exceptional low levels for the target
are likely to be warranted for “an extended period of time.”
The March meeting, which expanded quantitative easing, occurred somewhat over a week after U.S. equities bottomed. Compared to vital signs at the time of the meeting in mid-March, the DOW is up 26% (but lower this week), oil is 46% higher (but also below its recent highs), and Treasury yields have climbed 72 basis points (but lost 19 bps this week). The dollar has depreciated 7.4% against the euro and and 2.3% relative to the yen.
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
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