Can’t understand it and I see no fundamental reason for it.
Has the US reversed the soft economic data it’s been churning out all year? Nope.
Has Japan’s economic future started to brighten? Nope.
So what the blazes is going on? You can’t tell me this is because we had one modest NFP and ADP report.
What do we know?
We know that there is a strong likelyhood that Japan is increasing it’s foreign holdings, but even that may be tempered by increasing JGB yields.
Just as the UK starts to turn out some good data the usual in-party political fighting kicks in and we self implode.
The eurozone continues to talk a good game without actually putting anything into practice. Meanwhile the economy is in recession with even the mighty Germans getting pulled down the drain.
China is once again in the will it/won’t it slowdown flux.
Even the yield chasers may be thinking twice about parking their money in Australia as the economy may be hitting the skids.
So are we trading fundamentals or are we trading a race to success? The odds are very high that the US will and Japan will turn around their economies and this is what I believe we are trading now. So is the market is putting it’s money on the almighty dollar? Forget Germany and China (in a polite way). They don’t come close when you are looking for pointers to a global recovery.
The US will always be the first port of call when the rest of the world needs hauling out of the shite, while Japan’s economy is so integrated with the US’s that if they do manage to turn round 20+ years of problems we really could be lighting the touch paper to a real, sustained recovery.
As usual it’s not going to be an overnight event but this dollar strength seems to be just that. From a trading point of view it’s left me in a bit of a pickle. I’m fine trading fundamentals short and long term, intraday tech levels and short and long term sentiment but this dollar move has me wary for now.
Is this move nothing more than a bet on the yanks or on the failings of everyone else?
I’d be interested to hear your thoughts also.
