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Takeaway: Fed perpetuated deflation hits oil and other commodities hard.

CRASH: Strong Dollar Deflation Continues To Crush Commodities - Oil cartoon 11.20.2015

It's a central planner's world and we're all just living in it. 

In a note to subscribers this morning, Hedgeye CEO Keith McCullough highlighted how the much telegraphed Fed rate hike is impacting global financial markets. In particular, McCullough singled out last week's gyrations in the U.S. dollar as a developing market trend to keep an eye on: 

"In rate of change terms, at 1.88% year-over-year that was the slowest Non-Farm Payroll print since the cycle peaked in Q1 2015, but the Fed is going to hike on that.

 

That’s why we signaled buy USD on last week’s Euro ramp of +2.7%. The Euro is back down -0.6% this morning to $1.08 and has no immediate-term support to $1.05; the data doesn’t matter to the Fed – the S&P 500 does."

CRASH: Strong Dollar Deflation Continues To Crush Commodities - dollar strong

That's important because (in related news) the strengthening U.S. dollar is ripping through oil markets:

 

"#StrongDollar (rate hike catalyst DEC 16th) driven #Deflation Risk definitely matters to most asset classes – after a -3.8% decline last week, Oil is down another -1.1% this morning to $39.53 and the Commodities complex remains in crash mode."

 

CRASH: Strong Dollar Deflation Continues To Crush Commodities - wti oil

That's just one example of how a stronger dollar continues to take its toll on commodity prices. (Note: Commodities (CRB Index) were unable to bounce on a Down USD week and remain in crash mode -20.3% YTD.)