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The charts that matter – is it turnaround time for the dollar?
The US Federal Reserve’s slightly more aggressive than expected stance gave the dollar a fillip. John Stepek wonders if it’s time for a turnaround.
On the face of it, the Fed didn't do anything particularly surprising. The market had expected the Fed to announce balance sheet "normalisation" in October. But it was a tiny bit more punchy than that there's still a feeling among those on the Fed's rate-setting committee that it'll raise interest rates at least once more this year.
The market tends to lean towards expecting the Fed to surprise on the dovish side rather than the hawkish side, So that made for a stronger dollar.
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Meanwhile, the US dollar index has perked up significantly. Is this a turning point for the dollar? It's one of the most important prices in the world, but if it does start to rise significantly, then the already-expensive US stockmarket could be in trouble (S&P 500 companies make a lot of their earnings around the globe when the dollar goes up, their products become a little harder to sell and earnings fall under pressure).
This is vital to watch a blip higher is one thing (the dollar has fallen a lot) but if this is a genuine long-term shift higher, then it could make a big difference to markets across the world.
US Treasuries
As investors started to re-evaluate the chances of rates rising again, ten-year US Treasury bond yields perked up a little.
Copper
Copper is still on a breather. It's fallen harder than I expected and it's interesting to note that it hasn't taken a lot to get the market extremely bearish on it again. To me that's a good contrarian sign that the market psychology remains sceptical of the inflation story, which in turn means it's the one thing that we really should be watching out for.
Bitcoin
US jobless claims
According to David Rosenberg of Gluskin Sheff, when US jobless claims hit a "cyclical trough" (as measured by the four-week moving average), a stock market peak is not far behind (on average 14 weeks), and a recession follows about a year later. If 20 May holds as the cyclical trough, then if Rosenberg is right (and to be fair, it's a small data set) we might already have seen the stockmarket peak, but I'd withhold judgement for now.
Oil price
(Brent crude oil: three months)
Chart number seven is the oil price (as measured by Brent crude, the international/European benchmark). Oil has headed higher again this week, partly due to hurricane disruption and partly as a side effect of the falling dollar. What's interesting to me here is that oil has just steadily crept higher and it's fair to say that no one is paying a lot of attention to it.
Finally there's Amazon. As the wider US markets remain close to record highs, Amazon remained well off its August high. The political attitude towards the big tech stocks is starting to sour (as my colleague Merryn discusses in this week's MoneyWeek magazine) and this showed up in Amazon's share price this week.
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