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Dollar Ticks Up But Heads For Worst Week In Nine Months - Reuters

Dollar Ticks Up But Heads For Worst Week In Nine Months - Reuters

Release Date:  Thursday, February 15, 2018

Dollar Ticks Up But Heads For Worst Week In Nine Months - Reuters
Even with the dollar rising up from a three-year low, it remains on track to record its biggest weekly loss in nine months.

“’This is pre-long weekend position squaring,’ said Marc Chandler, chief global currency strategist at Brown Brothers Harriman & Co in New York, referring to the dollar’s advance on Friday. ‘I think people don’t have a lot of conviction.’

“The U.S. currency has been weighed down by several factors this year, including the perceived erosion of its yield advantage as other countries start to scale back easy monetary policy.

“Traders’ confidence in the dollar has also been worn down by worries over the United States’ current account and budget deficits, with the latter projected to balloon to near $1 trillion in 2019 amid a government spending splurge and hefty corporate tax cuts.

“The dollar index was on track to lose 1.6 percent on the week in its largest decline since May 2017.
Traditional market correlations have been scrambled this week. Declines in the dollar have come as U.S. Treasury yields have hit four-year highs and as stronger-than-expected U.S. inflation has bolstered bets that the Federal Reserve could increase interest rates as many as four times this year.

“’The market is befuddled by what seems to be changing inter-market relationships ... Last week the stock market was falling off because of rising yields. This week yields rose and stock markets rallied,’ said Chandler.

“The reappointment of Haruhiko Kuroda as Bank of Japan governor and the nomination of BOJ executive director Masayoshi Amamiya and Waseda University professor Masazumi Wakatabe as deputy governors were seen certain to keep the central bank on an ultra-loose policy path.” (“Dollar ticks up but heads for worst week in nine months.” Reuters 02.15.18)

Consumer Prices Jump Much More Than Forecast, Sparking Inflation Fears - CNBC
In January, The Consumer Price Index jumped 0.5 percent, well above market expectations and a key indicator of inflation trends.

“The Consumer Price Index rose 0.5 percent last month against projections of a 0.3 percent increase, the Labor Department reported Wednesday. Excluding volatile food and energy prices, the index was up 0.3 percent against estimates of 0.2 percent.

“The report indicated that price pressures were ‘broad-based,’ with rises in gasoline, shelter, clothing, medical care and food.

“Markets reacted sharply to the news. The Dow opened more than 100 points lower, but reversed those losses after the first half-hour of trading. Government bond yields also turned higher, with the benchmark 10-year note most recently trading near 2.88 percent, a gain of about 3.8 basis points.

"’Faster economic growth over most of the past year has tightened labor and product markets and helped to boost prices at a faster pace,’ David Berson, chief economist at Nationwide, said in a note.

"’We expect real GDP growth this year to be around 3 percent — faster than trend and supportive of higher inflation.’

“Investors were watching the report closely after fears of surging inflation helped send the stock market lower and bond yields higher. A strong rise in inflation would send borrowing costs higher and could cut into corporate profits.” (“Consumer prices jump much more than forecast, sparking inflation fear.” CNBC 02.14.18)

US Economy Is An ‘Accident Waiting To Happen,’ Says Yale Economist Stephen Roach
Stephen Roach, Yale University Senior Fellow, told CNBC on Tuesday that we are kidding ourselves if we think the economy is sound and that we are an accident waiting to happen.

"’The way I look at the fundamentals is they're extremely fragile, and we're kidding ourselves every time there's a correction to say, well the economy is sound,’ Roach said. ‘It is not sound at all when seen through the lens of low savings.’

"’Through no fault of the Trump administration's they inherited a U.S. economy with a very, very low savings rate. The mistake they're making is embracing deficit spending in a way that will take that savings rate even lower,’ said Roach, formerly chairman of Morgan Stanley Asia and the firm's chief economist for the bulk of his 30-year career at the financial giant.

“The savings rate of individuals, businesses and the government sector, stripping out depreciation, fell to about 2 percent of national income late last year, Roach said. ‘That's one third the average in the final three decades of the 20th century.’
“U.S. stocks fell 10 percent from their record high last week, falling into correction territory for the first time in two years. The major stock indexes have recovered in the last few days, and many strategists have noted that global growth remains on an upward trend.

“The only way the U.S. has been able to grow is borrowing surplus savings from other countries, running massive current account and trade deficits to attract foreign capital, Roach said. ‘Now we're doing protectionism against the providers of that foreign capital.’

"’We're an accident waiting to happen here, and just by spinning a market correction, saying the fundamentals are sound, and then going down the road of deficit spending — that's a worrisome way to run any economy, let alone our own.’" (“US economy is an ‘accident waiting to happen,’ says Yale economist Stephen Roach.” CNBC 02.13.18)

Wall Street Eyes Gold As Inflation Stirs, Futures Near Multi-Year Highs - CNBC
EverBank’s Chris Gaffney, spoke to CNBC Thursday about how now may be a good time to own precious metals for the volatility on the equity markets has people looking at alternative assets

"’We think that it is a good time to own the precious metals,’ said Chris Gaffney, president of EverBank World Markets. ‘We are seeing a burgeoning middle class and more disposable income in India and China, which should lead to more physical demand.’

"’At the same time, the volatility on the equity markets really has people looking at alternative assets that can hold their value in times of market turmoil,’ he added.

“Gold tends to perform best during periods of rising inflation, as investors look to precious metals as a store of value. With a strong economic outlook, market volatility and nascent signs of inflation, the Fed is likely to bump rates multiple times in 2018.

"’Ultimately, the Fed has reason to be measured with interest rate increases, which will work in gold's favor," wrote CFRA strategist Lindsey Bell. "We see gold as a smart and defensive way to diversify a portfolio in the later innings of a bull market and ahead of what has historically been a volatile year as mid-term elections approach.’

"’Gold works well for unexpected inflation,’ he added. ‘And this is the most widely anticipated inflation I've ever seen.’" (“Wall Street eyes gold as inflation stirs, futures near multi-year highs.” CNBC 02.15.18)