Put on the a tin foil hat if you must, but US dollar's rally is resuming after short consolidation phase. I think the rally is only about 1/3 of where it is eventually going.
On the one hand there is the (self-admitted) persistently over-optimistic Fed saying it's not a big deal:
BULLARD SAYS DOLLAR NOT A HUGE FACTOR FOR U.S. ECONOMY
And on the other hand, this is what actual CEOs are saying...
As Crude's bounce gathers pace so the world's beaten-down commodity-currencies are exploding higher. Aussie Dollar has given back all its RBA rate curt losses, The Russian Ruble is soaring, and the Canadian Dollar isd back under 1.24 against the USDollar... The USD Index is now down 1.3% since Friday.
Simple near-term outlook.
The Japanese fire at the Europeans. The Europeans fire at the Japanese & Chinese. The Chinese fire scattershot at everybody else in Asia. England & America prep to teach those they consider muppets not to play with guns. It's World War Money, if you know what I mean...
"The Ruble has fallen by 50% in a year. The price of oil has halved, the price of copper, iron ore and many other commodities has tumbled. The Swiss franc has been de-floored and the uproar was huge. All random events, all part of a pattern. Financial markets are feeling the effects of a pick-up in volatility that has followed the end of Fed QE. While zero rates were augmented with Fed bond-buying, investors went around the world in search of higher yields, in all sorts or assets and currencies. Traders and investors of one kind or another resorted to leverage to reach the yield targets they needed to match their required investment returns. All of which was fine while the party went on forever, but now that it’s ending, the outcome is anything but fine."
This is what Goldman has to say in order to assure that clients flood Goldman's prop pardon flow traders with "Buy USD" orders: orders which Goldman, being on the other side, will be delighted to fill.
I have told you the US dollar was going up for months. Some mocked me. Others insulted me. So what? I tell you the dollar's bull market remains intact.
“No stock-market crash announced bad times. The depression rather made its presence felt with the serial crashes of dozens of commodity markets. To the affected producers and consumers, the declines were immediate and newsworthy, but they failed to seize the national attention. Certainly, they made no deep impression at the Federal Reserve.” - 1921 or 2015?
Curency wars are zero-sum. Interest rate race is not.
USDCAD breaks 1.23 - weakest since April 2009
Unexpected to most, The Bank of Canada cut its benchmark interest rate to 0.75% citing financial stability risks and worried about downside inflation risks. The press release is extremely negative... *MAGNITUDE OF OIL SHOCK CREATES EXCEPTIONAL UNCERTAINTY: BOC
- Obama Targets Income Gap in Address That Shapes 2016 Election (BBG)
- Republicans Reject Obama’s Main Economic Proposals (WSJ)
- Senate’s Shelby Says White House Bank Tax Is Dead on Arrival (BBG)
- Is Dollar Next? Investors Reassess After Swiss Shock: Currencies (BBG)
- Bank of Japan Cuts Price Forecast, Maintains Record Stimulus (BBG)
- Pound Weakens After BOE Policy Makers Drop Call to Raise Rates (BBG)
- Putin not flinching on Ukraine despite economic crisis (Reuters)
- Indonesia will not make public full preliminary AirAsia crash report (Reuters)
- Party Hasn't Stopped for Russians at Davos Even With Ukraine Sanctions (BBG)
Top ten things that investors will likely be watching in the week ahead.
Simple cogent analysis of the price action in the capital markets. Take it or leave it.