Friday, December 11, 2015

Is The Fed Being Forced To Hike Rates To Defend The Dollar?

Related Negative Interest Rates Are Here | JP Morgan private banker: “We can’t make money anymore…"

Related The Dollar Is No More? Countries and international groups that have switched from US dollar to national currencies in trade

Source - Zero Hedge

At the moment, the strength of the $USD correlates very strongly to equities.  When King Dollar is torpedoed like it was yesterday, stocks plummet.

So does this mean that a rate hike next week will be tremendously bullish for stocks?

The argument runs like so:
  1. Fed tightening will shoot the $USD through the roof
  2. Beaten-down currencies like the JPY will crumble again with respect to the Dollar
  3. The Yen carry trade and everyone riding on it will launch equities to new highs
When the market falls off its highs in January, the Fed can then rally equities by ... adding another 25 bps.

And so on, until the correlation shifts again between USDJPY and equities.

This of course begs the question -- is the Dollar actually on the brink of collapsing today, with the Fed now forced to defend it with a series of rate hikes?

The conventional wisdom of "one and done" or "no hikes at all, ever", may be completely wrong.

2016 may be about the Fed scrambling to regain control of the monster they have created, where the market bounces at each FOMC (against the overall decline) because they continue to tighten.  Between hikes the market sells off again with increased severity as the market comes to grips with what is happening.

The Fed hand may be forced.

The new game may be for each nation to export deflation to the rest of the world.




Sign-up for RSS Updates:  Subscribe in a reader

Sign-up for Email Updates:

Delivered by FeedBurner

View and Share our Images
Curious about Stillness in the Storm? 
See our About this blog - Contact Us page.

If it was not for the galant support of readers, we could not devote so much energy into continuing this blog. We greatly appreciate any support you provide!

We hope you benefit from this not-for-profit site 

It takes hours of work every day to maintain, write, edit, research, illustrate and publish this blog. We have been greatly empowered by our search for the truth, and the work of other researchers. We hope our efforts 
to give back, with this website, helps others in gaining 
knowledge, liberation and empowerment.

"There are only two mistakes one can make along the road to truth; 
not going all the way, and not starting." - Buddha

If you find our work of value, consider making a Contribution.
This website is supported by readers like you. 

[Click on Image below to Contribute]

No comments :

Post a Comment

SITS blog is a venue where Data we come across can be shared with all of you. If we look past personal bias, and distill the Absolute Data within each post, our natural intuition will assemble these nuggets together and reveal a greater truth.

We do not know what that truth is yet of course. We are discovering that together as a whole by sharing and discussing our unique perspective. Share your thoughts and we will all come to a greater understanding as one.

Support Stillness in the Storm