It’s a funny old world we live in. We’ve gone from a market dominated by risk-aversion waxing and waning to one where the market is once again obsessed with the notion of the Fed cranking up the printing presses. This, despite modestly improved US economic data of late (improved private payrolls, strong manufacturing, better retail sales, rising business inventories, etc…) which suggest the US will avert a double-sip.
The dollar is being forsaken across the board today rather than on a selective basis as had been the case previously. Momentum is quite strong and is not to be faded. As always, I urge you not to fade the weak dollar trend just for the sake of buying “cheap”dollars only to see them get cheaper. Wait for the trend to shift before jumping on board.
I for one, have no faith in the notion that the Fed will do QE before year end. Bernanke seems particularly reluctant to do so unless he sees no other option. With the Fed’s central forecast for a soft patch rather than a double-dip, I see no reason for the Fed to shift course now. If the data worsens once again, sure, but not while it is improving modestly.
If I’m write, the dollar will recover some of its lost ground, particularly against the JPY and CHF…Let the market turn before jumping aboard. We’re miles away from a turn, as yet but we’ll watch for signs that a turn is underway.