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Euro Gains on Weak Dollar, Oil!
By Mike Conlon | January 11, 2010
The Euro is up today across the board and is at a 3-week high against the US dollar as dollar weakness is back on the table. In lieu of Friday’s NFP report, investors are betting that US interest rate hikes have now been pushed out even further, and world stock indexes and commodities are up on the morning.
The Euro, otherwise known as the “anti-dollar”, should strengthen unless sovereign default issues come back into play. Not to mention the strength in oil, which has shown a strong positive correlation to the Euro. This also benefits the commodity currencies (Aussie, Kiwi, and Loonie) in that order due to the interest rate differentials.
So, it appears to be back to a “risk-taking” day with the dollar down, everything else up. Look for this theme to continue well into the first half of this year. The only way this gets derailed is if the Fed makes a move on interest rates or if there is some sort of global crisis.
So the million dollar question is what is going to cause the Fed to act? Normally, I’d be inclined to say that an improving employment picture or the threat of inflation would be the catalysts, but I’m not even sure that these will be enough. With the catastrophe that is US national debt, Bernanke is begging for any type of inflation to help mitigate this, so it could be some time before we see rate hikes. Economists are now looking at mid-year as the most realistic chance of this occurring, but if then employment picture and by proxy demand doesn’t pick up, then this could be entirely off of the table.
Also to note today is the employment figures coming out of Canada, which showed a small loss vs. a gain in the month of November. The Canadian dollar (CAD) is down across the board. While the Loonie benefits from commodity gains, it should lad both the Aussie and the Kiwi due to lower interest rate differentials. The Loonie is also somewhat dependent on US recovery as the US is the largest recipient of Canadian exports.
If US dollar weakness continues to be a theme well into 2010, then we are going to see MAJOR commodity inflation.
This means that if you hold US dollars you could see a MAJOR reduction in your purchasing power. There are ways to protect yourself from this happening, but you have to know what you’re doing. And that’s why we offer our currency trading courses! They are affordable, convenient, and could help you save your nest egg from dollar destruction!
So what are you waiting for? Get educated today!
Tags: Aussie, blog, cad, commodities, course, currenc, currencies, currency, currency trading, dollar, dow, EUR, Euro, fed, forex, forextrading, fx, fxedu, Il, interest, interest rate, interest rates, invest, investor, market, Mike Conlon, ssi, stock, time
Topics: What To Look At In The Market |
January 12th, 2010 at 2:12 am
Dear Mike
thank you very much for this valuable information.
Please tell us about which pair we should chose in this situation!
I think AUD/USD is the best to go long with it, as a risk taking strategy!!
what do you think?