06 Feb The US is the Only Country Considering Rising Rates Because of Growth, a Major Factor as to Why the Dollar is so Strong.
Equities were strong because of oil. What? Did I not write yesterday equities closed quietly lower because of a sharp decline in oil? The volatility in oil is incredible. Is this the result of even greater geopolitical tensions in both Russia and the Middle East?
Equities were also boosted by a high profile merger and perhaps the ECB’s strong stance towards Greece. Can it be suggested the ECB believes a possible Greek implosion will be a nonevent, partially the result of its massive QE program announced 2 weeks ago?
Speaking of QE, the US trade deficit rose to its highest level in over two years as imports surged, the result of a declining dollar. It appears the entire developed and developing world has embarked upon some version of QE or lowered interest rates; the net effect creates a falling currency against the dollar. Such a currency enables cheaper imports to the US.
I have never abandoned the stance that the US is the proverbial engine of global growth. Can we suggest that this engine is back in full strength because of currency relationships and the US has the highest relative growth rate, hence able to purchase foreign goods?
I believe it is noteworthy to write the US is the only country considering rising rates because of growth, a major factor as to why the dollar is so strong.
Speaking of strength, today January’s employment data is released. Analysts expect an increase of 230K non-farm and 223K private sectors payrolls. The unemployment level is expected to be 5.6%, a 0.3% increase in average hourly earnings and a 34.6 average work week. Will there be an increase in the labor participation rate from an approximate thirty year low of 62.7%?
As written many times, I can argue the vast majority of the decline in the unemployment rate is the result of workers leaving the work force.
Last night the foreign markets were down. London was down 0.27%, Paris down 0.37% and Frankfurt down 0.69%. Japan was up 0.82% and Hang Sang down 0.35%.
The Dow should open quietly higher but his could change radically given the significance of the today’s labor report. Oil is currently higher. The 10-year is up 1/32 to yield 1.82%.