Dollar is bid...euro, gold, silver under pressure

Yesterday we got big retail numbers and the dollar rallied hard, causing euro, gold, and silver to sell off. Today's inflation numbers diminished rate cut expectations, and intensified the dollar rally. Although the Fed has dropped its previous language of balance between growth risk and inflation risk, the Fed has not given the market a clear signal that it will give priority to growth risk. Instead, the Fed has unveiled a new plan to soothe global liquidity problems. The response from the stock market was temporarily bullish, but short lived as doubts were raised as to the plans novelty and its ability help resolve the real underlying issues of inter-bank liquidity: housing and credit crisis. What we really need is for the Fed to break out of its "gradualism" and be more aggressive. Of course, the Fed will eventually have to resort to aggressive measures...it's just a matter of time before we see more pain in the US economy.

In the meantime, looking at the euro, the big question is how far will it drop. My guess is around $1.43, and then I think it will range until early next year, or at least until we see more pain in the US.