The US dollar’s slide is once again prompting a steady drum beat warning that the end is nigh. While a further dollar decline seems likely, its demise is likely being exaggerated and a recovery is likely late this year or early next year. This view is predicated on the understanding that what is ailing the dollar is largely cyclical in nature and, cyclically-speaking, the US is ahead of the pack and the near-term costs of the reflation policy can be expected to yield medium-term returns.
Friday, September 21, 2007
Friday, September 14, 2007
One of the interesting elements in the US dollar’s recent decline is that few, if any, are suggesting that it is being driven by its perennial nemesis, the large trade deficit. Most seem to recognize that the divergence of monetary policy and the anticipated trajectory of interest rate differentials are the significant force driving the greenback lower. However, many expect the fall in the dollar to fuel improvement in the US trade deficit. Such hopes are likely misplaced.
Friday, September 7, 2007
The unexpected decline in non-farm payrolls, the first such decline in four years, leaves no doubt that the Federal Reserve will cut interest rates at the September 18 FOMC meeting. The jobs data, which included a downward revision of 81k jobs over the past couple of months, is simply horrific and fans the most pessimistic fears. The housing market woes will undermine the US consumer, push the US economy into recession and drag down growth in much of the rest of the world.