Timothy K Fife – Markets Update

Tuesday, ¬†saw the US Dollar again the winner of the currency wars as the US Index hit an 11 year high (95.59). Inverse as Gold is the the Dollar, it ended the trading day only $2.00 negative from the open but suffered a huge drop of $13.00 in an hour during the US session. Actually may of the pairs were rather subdued yesterday with much more movement seen from Monday’s action. The Euro and British Pound closed just about where they opened, with the Aussie Dollar making some nice gains after Gov. Stevens decided to keep the Interest rates unchanged. The Canadian Dollar was noticeably stronger across the board also. Stock Markets were down on low volatility, perhaps many Investors now waiting for the big one, Friday’s Non Farm Payrolls report. So what was the driving catalyst for yesterday’s Market movements? Usually it is Central Banks Yellon, Draghi, Carney, or Greece’s Tsipras but no, it came form Israel’s Prime Minister Netanyahu who addressed US Congress and talked about Saudi Arabia, Yemen, and Iran’s OIL reserves with possible further sanctions and US poor policy with Iran. OIL price reacted immediately and is up $1.00 and over the 50.00 a barrel finishing the day at 50.59. Hedge funds are now reassessing their OIL short positions with many having actually closed out long term shorts.. This is also the reason GOLD had its big drop while Netanyahu was speaking. Inflation has been depressed for two reasons – the strength of the US Dollar and the massive drop in Energy prices. The effect is low interest rates which hurts real growth and employment and increased risk-taking by borrowers and yield hungry lenders. All this leads to mispricing of assets prices like the Stock Market and real estate. The annual Inflation rate for the Unites States for the past twelve months is – 0.01%, target 2.00%. Central Bankers spend most of their time strategising how to stay out of the deflationary spiral which Japan has suffered during the last 20 years. For the second month in a row the Australian Dollar reacted prematurely to the official release time of its Interest Rate statement by Gov. Stevens. In the minute before the AUD/USD jumped up 50 pips curiously being bid. Was it high frequency algorithms or underhanded people in the know, trying to gain an advantage in the Market? ASICS, the regulatory body, said it is under investigation and will not comment at this time. You can read about Timothy K. Fife at SeekingAlpha