Check out the chart below.
Well, I could almost stop there couldn't I? Now take a look at many of the other recent U.S. indicators.
http://www.conference-board.org/economics/indicators.cfm
Consumer confidence down....U.S. leading indicators (which show what is to come) point downward...the "help wanted" index is up...Help Wanted Online shows that the labor market is still slowing as there are more job vacancies.
When you put all of that together it doesn't look good in the near term does it? I think you'll see the major U.S. stock indexes dive shortly once again. Thus the carry trades (especially EUR/CHF right now) will dive along with them.
The one bright spot is that transportation stocks are firming up. These are some of the first ones to turn up when you get an economic recovery. They lead the way. This is shown by the transportation average (TRAN).
Also, the home builders are firming up (symbol XHB). Now with all of that said, stocks try to lead their sectors by 6+ months. So this means that the economy will continue to be bad in the near term but it could improve in the latter half of the year if these trends continue.
This could cause the dollar to firm up in the latter half of the year as inflation soars and the economy recovers. This would cause Bernanke to "take back" the recent rate hikes at that time and would cause the dollar to rally.
Now keep in mind, in the near tern (next month) Bernanke may play it safe in the near term and cut rates some more. However, whenever he sees the "threats" to growth subside, he'll go back into "inflation fighting" mode which will bode well for the buck later on this year.
Sean Hyman
Editor/Trader
www.money-trader.com
Comments