Yesterday's 12 month CPI print of 7.0% could reasonably have been taken to foreshadow serious action on the part of the central bank, with a strengthening of the dollar being the result, but nope.
From Bloomberg, January 12:
Sell Dollar for Everything Else Is Echoing Across Trading Rooms
Sell the dollar and put money into assets such as emerging-market stocks and gold as the world’s economic recovery gathers steam, money managers say.
A growing chorus of investors is betting the world’s reserve currency has reached a peak in a dramatic turnaround from a month ago when positioning in the greenback was the most bullish since 2015. K2 Asset Management recommends selling the dollar for Asian emerging bonds and European stocks, while Brandywine Global Investment Management is buying commodity-linked currencies. Bleakley Advisory Group LLC favors gold and silver.
The Bloomberg Dollar Spot Index slumped the most since May on Wednesday, tumbling 0.6%, as traders sold the U.S. currency following inflation data that was generally in line with market forecasts. The losses were exacerbated as funds that had looked to front-run a hawkish Federal Reserve unwound their long positions as improving growth from Germany to China added to the case for value outside the world’s largest economy.
“The dollar has clearly rolled over and in hindsight it really only rallied last year because the Fed was ahead of the Bank of Japan and European Central Bank in tightening,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group in New Jersey. In this environment, “I still love gold and silver” as an alternative to the dollar, he said.
The dollar is likely to keep weakening as the hypothesis of a wider U.S. deficit and a broader global recovery favoring assets outside America is now starting to play out, investors say.
At K2 Asset Management’s office in Melbourne’s Collins Street, George Boubouras is looking for opportunities to buy everything from the Chilean peso to sovereign bonds in Southeast Asia.
“The dollar’s peak is definitely behind us,” said Boubouras, head of research at the fund manager. “Currency traders are factoring in the Fed’s hikes and economic recovery well and truly now. There’s plenty of opportunities across sovereign bonds, credit and stocks from emerging markets to Europe with convictions the dollar could weaken further.” ...
....MUCH MORE
See also:
The #dollar has broken down. All the talk of Fed tightening...the end of QE, rate hikes and reducing the Fed balance sheet...but $DXY has fallen below its 50dma when it should have soared. Commodities should be the winners. #uranium $EU pic.twitter.com/xRk9oyGGPY
— enCore energy corp. (@enCoreEnergy_EU) January 12, 2022
Although enCore is right about uranium I do not know about the metals that trade more inversely to the dollar. in particular copper and silver.
One of the reasons to have mental models of the market matrix is to trigger your Spidey sense when something seems out of place, and the action in the buck these last few days sure fits that bill.
Something's up and we don't know what.
