Fantastic claims abound when it comes to the U.S. dollar.
“The dollar will crash as the Fed prints an endless supply of cold, hard greenbacks!”
“The dollar will soar as nasty deflation grips the world, and debtors scramble to buy dollars to pay back their debts!”
“The dollar will be replaced as the global reserve currency as the world loses faith in the U.S.!”
Exclamatory statements aside, the U.S. dollar has actually been stuck in a wide range for essentially the last 5 years. Even the commodity market has been relatively boring for the past 2 years, generally moving up and down with the dollar, and ending back in the same place over time.
To start 2013, the dollar has shot higher and commodities have moved lower, particularly the precious metals space. Gold and silver are down more than 2% since the Fed minutes were released yesterday afternoon. The dollar continues to inch higher as well. Our main interest in the dollar will be its effect on multinational earnings, which has been a theme in the past when the dollar makes a big move. But we’re relatively confident the fanatics will not be proved correct, once again.
Markets overnight:
- Asian and European stocks were generally lower overnight, though only small pullbacks on light volume.
- The main move has been in gold, silver, and currencies, as the dollar gains and dollar alternatives lose. Treasury bonds are also selling off as the market gets concerned about the end of Fed purchases in 2013 (which I think is quite unlikely).
- Payrolls data at 8:30 am will be the key today. ISM Non-Manufacturing data at 10:00 am will also be an important release