As you like it, the week of uprising USD



The last ten days in May banks and currencies attract investors and market analysts more than oil and gold. Why? There are four key points.

1)   New York and Richmond Fed presidents sent signals that raising interest rates in the USA will be possible as soon as in June. By the way, low numbers in the last employment report shocked the public. Instead of +202,000 new jobs American citizens have got only +160,000 in April, less than in January this year. The Fed is always interested in the numbers from the U.S. Bureau of Labor Statistics and the inflation. Janet Yellen emphasized the key role of the high employment and the inflation close to 2% for the American economy and considered them as perfect conditions for increasing bank rates. Once, when the perfect conditions have appeared on the scene in the middle of the 2015, Christine Lagarde from the International Monetary Fund has sent to the first finance American lady a warning not to push the interest rates, not to provoke currency wars. The Fed has omitted the point and increased the rates only in December. Right now the Fed representatives remind us about their power to change the financial world. However, the numbers in the most recent employment report are far from the perfect conditions. So the officials making attempts to add charm to the U.S. currency without serious background, are not they? Next week Janet Yellen will describe her impression about the American economy and the finance in the world, clarifying the situation.

2)   At the most recent conference of finance ministers and central bank governors from Britain, Canada, Italy, France, Germany, USA and Japan in Tokyo the main ways to solve the problems of the global financial system were highlighted. The problems concern terrorism, refugee crisis, political conflicts. The powerful economies feel responsibility for the world health and wealth. The International Monetary Fund, the EU and the World Bank are interested in the stronger dollar to keep commodity prices lower in order to give national economies, which purchase oil and metals, a chance to buy more and pay less. This is the way to save their money for social programs.

3)   Other currencies are giving the way to the USD. Japanese yen is losing weight; but the government has no plans to repeat the intervention of 2011. The rates hike in the USA will ease the pressure on the Japanese exporters, because yen will be melted by the USD. The GBP and the single currency anticipate potential troubles of Brexit in June 2016 in combination with ECB policy to match the values of the EUR and the UCD next spring. In the beginning of the year the dollar fell against yen by 12%, against other currencies, including the EUR and the GBP, by 7%. This month the USD is spreading the wings.

4)   The Q1 earning season is almost over. Miserable reports of market giants opened doors to modest investors and gave them a chance to catch some famous shares for a penny. Large technology like Apple and Google together with consumer discretionary companies like Netflix and Amazon, survived through their worst quarter since 2014, became desirable. Warren Buffet, the great awful, has bought $1 billion worth of Apple shares, the word has been spread, traders received the signal, the price bounced. The dollar got the promotion as the currency of uprising stocks exchange. Long Live the Dollar!

As you like it, the week of uprising USD. But let us listen to the wise, Janet Yellen will speak next week.