The bias toward a weaker Dollar remains, whatever the hedging tricks

We neglected to mention that we can expect to get a freshAtlanta Fed GDPNow for Q3 on Friday. Can it really be another 4% as we had last week? Bloomberg Economics gets 1.4%. It’s interesting this is not a big debate, especially since we can’t expect to get the standard government data until mid-December. Robust growth favors the dollar no matter what the Treasuries (or Trump) are doing.

 Also missing is serious talk about income inequality. These days it’s being named “affordability” but that’s not the same, since it applies only to the lowest paid. What about the inherent instability of the top 10% doing 50% of the spending? Fairness aside, in an economy with a GDP that is two-thirds consumption, depriving low-earners of the ability to spend/consume is a long-term drag on the economy. The rise in credit card delinquencies (90-days) is 12% of the total of $1.2 trillion, the most since 2010. The NY Fed said delinquencies are not rising, so it’s still just a beginning. 

Forecast

The US holiday today throws a wrench into the outlook. The bond market is closed and FX traders at banks might be skeleton crews. We still think the ATR breakout line at 1.1664 in the euro is a critical point. Any number of other critical levels could be named, especially if you put a bunch of Fibonacci retracements on the chart. Never mind—a holiday day is hardly ever the occasion for a fresh move.

Both Bloomberg and Reuters have stories today about how the carry trade and hedging have slowed the pace of the dollar’s decline. It’s going to be a different story next year, probably. 

The bias toward a weaker dollar remains, whatever the hedging tricks. That tricks are needed to protect against the Trump acts that pose as policies is commentary in its own right. The dollar index might be doing one thing but watch gold anyway. The inverse correlation is reasonable.

Fun Tidbit: Bloomberg is well known for Trump derangement syndrome but has the Facts. Today it has a story on the failure of Trump Media, which just reported a quarterly loss of about $55 million on sales of less than $1 million in the quarter just ended, after a loss of $19 million the year before.

The stock is now down about 70% from the January high. The main thing holding it up at all is $1.5 billion in crypto. This is the guy who went bankrupt six times, remember.

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