The dollar went parabolic on the assumption the Fed will hike interest rates. This is highly unlikely on several fronts:
1. Key economic data has been mixed and deteriorating. Higher rates will finish off the housing sector, kill the borrowing mentality of the American consumer, and dry up what little financing that is going on.
2. The serving of current public debt will highly strain the nation.
3. There is a correlation between increasing Fed funds rate and money velocity increasing. Velocity of money is at all-time lows (along with market volatility), and if it spurs there is the potential for higher-than-expected inflation.
Even on a short-term basis, the dollar is highly overvalued. I am looking longer-term, 3-5 months out. As we grow near the potential of a spring "hike," the Fed will continue to be vague and indecisive causing sentiment to decay.
1. Key economic data has been mixed and deteriorating. Higher rates will finish off the housing sector, kill the borrowing mentality of the American consumer, and dry up what little financing that is going on.
2. The serving of current public debt will highly strain the nation.
3. There is a correlation between increasing Fed funds rate and money velocity increasing. Velocity of money is at all-time lows (along with market volatility), and if it spurs there is the potential for higher-than-expected inflation.
Even on a short-term basis, the dollar is highly overvalued. I am looking longer-term, 3-5 months out. As we grow near the potential of a spring "hike," the Fed will continue to be vague and indecisive causing sentiment to decay.
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