We saw a significant degree of real and psychological capitulation yesterday in favor of the dollar. The driver for the buck continues to be risk (money back to the center to hide, we see it in the bond prices and soaring labor yield), global growth screeching to a halt (we see that in the big cut out of Australia), and emerging markets most everywhere being crushed.
Unemployment Rate and Dollar Cycles
In the chart below, we have overlaid the dollar bull and bear cycles on top of the
unemployment rate. And given the last two cycles in the dollar i.e. bull from August
1991 to July 2001 and bear cycle from July 2001 to March 2008 (assuming it bottomed
there; yes a big assumption we make I know), it doesn’t seem there is much correlation
with the unemployment rate. But what this chart does seem to show (granted a small
sample size) is that a bear or a bull market can begin in the face of rising unemployment.
So, let’s say the unemployment rate is another one of those unreliable indicators on
which to trade the dollar—at least longer term.
I guess the European Central Bank is tired.
After pumping tens of billions of euros and dollars into its financial system over just the last two weeks, the ECB couldn't muster up enough energy to cut rates today. The ECB left their benchmark lending rate sitting at 4.25% after they concluded their policy meeting this morning.
