Monday, March 16, 2015

Repeat… The USD is going parabolic. Something somewhere is collapsing

Marketvane’s Bullish Consensus for the $US hit 90% yesterday.  At the beginning of March it was 83%.  Market bullish sentiment toward the dollar has not been this bullish since the turn of the millenium.  It is a very strong contrarian signal…
The US Dollar index is going parabolic.  More often than not, markets that go parabolic will crash.  This is what happened with the dollar in 2008 (click to enlarge):
USDX1 The common “narrative” out there is that the dollar squeeze is being fueled by European sovereign and corporate entities scrambling for dollars in order to pay dollar-denominated debt obligations. Yes, this is part of the equation. But, just like in 2008, it is a sympton of a castrophic underlying systemic problem. After all, the Fed has created close to $4 trillion in new dollars, $2.6 trillion of which are sitting in the excess reserve account of the big banks at the Fed earning interest. That’s $2.6 trillion in excess dollars that can used to fund any excess demand for dollars.
Rate cuts: 24 so far and there’s more to come
An interest rate cut from South Korea Thursday takes the number of central banks that have stepped up their monetary easing this year to 24 and that number is likely to rise, analysts say.
South Korea’s decision to cut its key rate by 25 basis points to a record low of 1.75 percent follows a rate cut by Thailand’s central bank on Wednesday and easing by central banks in China, India and Poland since March began.
Read MoreBank of Korea joins the global easing spree
Russia and Malaysia are among the countries that economists say could join the growing list of central banks that have slashed borrowing costs since the start of the year.
“Fundamentally, the easing around the world is driven by inflation turning out lower across the board,” Anatoli Annenkov, senior European economist at Societe General, told CNBC.
“There is a debate about currency wars, monetary easing to push currencies lower, but fundamentally this is a story about growth and inflation,” he added.

No comments:

Post a Comment