Dollar Dirtnap

I mentioned a few days ago that some of the old reliable correlations were perhaps breaking down. Yesterday’s market action provided further fuel to this idea. Although, to be sure, a couple of days price action does not mean a new trend has necessarily formed. Yesterday was simply a day of selling US assets. The $ has been on the fall for 2.5 months now and certainly the safe haven attraction is waning. Yesterday however, we saw the S&P, the Buck and Bonds all getting a bit of a spanking. Looking at the charts, we can see just how the relationships between the 3, having held up well since September, have started to breakdown over the last month. I’m not really sure what this means for the market, I would think there may be an element of non participation, which makes sense to me, certainly for a while as investors get their heads around the rejigging relationships within the market. Of course lower volumes could serve to exacerbate moves. Again, it is only speculation that this theme persists but there seems to be reasonable support and commentary in the market that it does.


Since Sep '08...
And then the last 10 days...
The cable move is interesting. While the possibly the UK not being AAA rated should not have been a shock to anyone, GBP did get hit on the announcement…only to come back with a vengeance and test 1.59. The $ really is unloved. Mind you, as I said, it shouldn’t have been a surprise, and anyway, does the market really care what S&P says? I mean, these are the guys who thought Toxic mortgage debt was AAA rated…so too was GE (for a long time) while its CDS was trading in the 600s, (as far back as Sep/Oct if I remember correctly) and it with a ton of debt maturing over the next couple of years. It finally lost AAA status in February.