This follows the FED’s rate cut on Wednesday and the fact that Bernake did not give investors any hope of a further reduction of interest rates in the U.S. At first the reaction was opposite to what we are now encountering, thus the Dollar began to weaken with the growth of share prices. What could the reason be for the change? Most probably not macroeconomic data connected with the US economy as the ISM Index reading was worse than expected. The reason for this is most probably the fact that investors have come to understand that the cycle of rate cuts is over or in other words has been put over for a future date. Another reason for the falls on stock markets could be the concern over the U.S sub-prime mortgage collapse.

What the outcome could be will be answered today, as one of the months most significant data will be published; i.e. the much awaited non farm pay rolls. This usually does have much of an impact on the market and this time should not be any different.

Omar Arnaout