The U.S. Dollar ramps and rates fall. That’s a clean cut #Deflation reaction to the Fed tightening into a slow-down.
Here's analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:
"The USD is re-testing the go-zone of $99-100 on the USD Index with the EUR/USD risk range suggesting $1.05 is next. In 2016 “forecast” terms, this remains grossly misunderstood from a foreign currency, commodity, EM, credit, etc. risk perspective."
On that point, the direction of commodities, currencies, Emerging Markets and credit are all tethered to the future of the U.S. Dollar. As a result of the USD strengthening and deflationary concerns, here's a sampling of what happened yesterday:
On a related note, Treasuries yields are tumbling after the Yellen Fed's rate hike, confounding Old Wall predictions. Below is another note from McCullough earlier today:
"The U.S. 10 year yield is now 2.21% = lows of the week AFTER the almighty “rate hike”- don’t forget that Industrial Production for NOV was -1.2% y/y (recession) and consumer spending put in its 6yr cycle peak (alongside employment gains) in Q1 of this yr too."
We know what this means, and so do you, because we've warned you about it for a while now...
