I spoke to Reuters earlier today About the US Dollar and why it’s falling today.
“We’re going back to a world of low inflation. That’s the market message right now,” said Adam Button, chief currency analyst at ForexLive in Toronto. inflation Fear is over. ”
The dollar is weak across the board today, with the AUD and NZD leading typical risk-on moves. The dollar index is in danger of reaching its worst level in a year, hitting a February 2nd low.
The Fed has been at the forefront of rate hikes, and until a few weeks ago it was thought that the Fed’s eventual cap could be significantly higher than in many other advanced economies. Now that seems much less likely.
So how do you shake it? I spoke with Dale Pinkert at TradeGateHub today on the subject I’m thinking about and how to trade the end of inflation concerns.
Admittedly, this is not a deal that started today. The bond market, initially overshadowed by the post banking crisis flight to safety, has been on the upswing for some time.
At the same time, many concerns permeate growth and how it fits into the equation is paramount for risk assets. I believe the recession will be shallow (although it may be long) and that lower interest rates and improved margins will outweigh the decline in demand. That could certainly be proven wrong, and global consumers will be put to the toughest test in Q3 after the summer spending kick, followed by a depleted savings run.
I’m also a commodities bull due to underinvestment and that theme could trigger another inflation, especially as OPEC targets higher oil prices. I also sympathize with the demographic debate about increases and the persistent demands for higher wages.
All of this brings a lot of backlash, but for now the trade is a simple and easy one.
