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| Dollar Index, four-hour chart, source:FXStreet.com |
cf. [EUR] Finding the Trend, yet 2019 0813
cf. [EUR] V Pattern and Euro 2019 0805 1
cf. [USDX] Watching the Market in the Short Term 2019 0717
Dollar Index, which tracks the greenback against basket of major six currencies dived making reverse-V pattern early August. It dropped from 98.94 on Aug. 1 to 97.21 on Aug. 6. And greenback stopped its falling and moved up and down in Bollinger Bands. Then it began to recover its price against major currencies basket.
Though external factors such as U.S.-Sino trade tension and currency conflict twist greenback, economy indices in the United States support dollar and dollar index.
The spread between 10-yr bond yield and 2-yr bond yield reversed, which made market participants to be in panic. It is ordinary that long-term bond's yield is higher than short-term's. Because long-term bond has more risk and pay more interest. Reversed spread between long-term bond and short-term's implies economy being in recession.
But an expert thinks that reversed spread doesn't hint recession but show recession being in progress. And he adds the worst economy situation may go pass. Because the yield of bonds is not reason but the result of current economy.
Anyway the reversed spread between 10-yr treasury bond's yield and 2-yr note's recovered on Friday.
U.S. Building Permits released on Friday recorded 1 million 340 thousands, which surpassed the market's expectation, 1 million 270 thousands. Good record in U.S. economy has supported greenback, and dollar index recorded 98.20 in this week.
Market anticipates FOMC will cut its benchmark interest rate again in next month. Most expect 25bp(0.25 percent) and some expect more dovish stance, 50bp. Fed's interest cut may lower dollar index, greenback's value against major currencies.
But we need to know that another central banks as well as U.S. Fed try devalue their currencies.
Olli Rehn, Governor of the Bank of Finland and member of Eurpean Central Bank, spoke that ECB prepares more strong 'package' to stimulate economy while the interview with Wall Street Journal on Thursday. The package includes interest-cut, more QE. He emphasized 'Overshooting' than 'Undershooting' while managing financial market and he added there are lots of economy risk such as global recession, U.S.-Sino trade war and England's hard Brexit.
Christine Lagarde, former IMF Managing Director and ECB president-nominee supports Europe's Quantitative Easing, and consider benchmark interest-cut, too. It's strongly expected to cut the rate in September.
Mario Draghi, ECB president, already spoke a new currency easing in September during the news conference in last month.
Market analysts anticipate ECB will cut 10bp to -0.5 percent, resume QE program which was finished in last December, and buy bond of 50 billion euro per month.
Of course, these program lowers euro and raises dollar.
Donald Trump, 45th U.S. President, continuously puts the press on Fed Chair, Jerome Powell to cut the rate, too.
Central banks of major countries and economy block have begun currency war.
These move may boost dollar and dollar index will keep rising, Gjallarhorn think.
Whether getting Short or Long, we need to deal more carefully, the currency war is ready to begin.
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