Alright, it’s time to talk about the ole’ greenback. Which, in case you haven’t been paying attention whilst increasing your odds of skin cancer at some overpriced beach resort, has been dropping rather precipitously since the beginning of the year. You may counter that a correction was long overdue since the Dollar has had a pretty good run over the past two years. And you would be technically correct – in relative terms compared with everything else the Dollar has been on a solid run since mid 2014. But in real purchasing power today’s Dollar is a whopping 27% weaker than when Will Smith’s big hit was hitting the charts in the summer of 2002.
We are floating in the midst of the summer doldrums and I don’t really see anything salient I haven’t covered over the recent past. The greenback continues to get hammered and as our collective purchasing power is sinking steadily it implicitly lifts the relative value of Dollar denominated assets since holding cash exposes you to the receiving end of Yellen’s fiat currency death stick.
The ECB is scheduled to meet on Thursday, however it’s only an internal meeting and no new economic staff projections (ESPs) are expected. Bond investors in particular are looking for Draghi’s press conference for clues as to what interest rate policy to expect for the third and fourth quarters of this year. But given that the EUR/USD is now heading toward 1.15 I have an inkling that Mr. Draghi will choose his words very cautiously as he is now walking a precarious economic tightrope.
It’s going to be a wild Friday it seems. Retail sales and CPI data disappointed earlier this morning, causing yields and the U.S. Dollar to head straight for the basement while gold of course is heading higher. I guess gold could be trusted after all, but hindsight is always 20/20 and you never know how the numbers get shuffled. Of course the NQ is soaring as I’m typing this as bad news is good for equities – back to the old QE script I take it. Unfortunately my long term outlook on not seeing a meaningful interest hike anytime this decade seems to be playing out as feared. Or as the saying goes: Don’t try to bullshit a bullshitter