If you’re just waking up from a post-July 4 hangover, you’ve already missed an incredibly busy morning with significant implications for the global economy.
Before we walk through the specific datapoints, let’s quickly present this chart (via FinViz) of the dollar vs. the Swiss Franc (a currency frequently seen as the safest of safe havens).
Yes, as you can see, the dollar is surging against the Franc, and in fact it’s surging against just about every other major currency as well right now (the euro, the yen, etc.).
So what conspired to cause this?
Well, you’ve already had 3 major central banks announce easing measures today. The Bank of England announced another 50 billion pounds of quantitative easing, the ECB cut rates (and its deposit rate) and out of nowhere, the People’s Bank of China did an aggressive easing. So 3 of the world’s biggest central banks are doing moves that are negative for their own currencies, and are therefore positive for the dollar.
Then you have the data.
All three labour-market datapoints for the US beat expectations. The Challenger Layoffs Report was the best in 13 months. Initial claims was the best in 6 weeks. And the ADP jobs report smashed expectations.
So the US economy is showing a pulse (add those numbers into the latest positive data on construction, cars, and houses) and it’s not clear that the Fed has any urgency to act. While the rest of the world is easing, the Fed is seeing a US economy that seems to be hanging on.
Thus the story: A decent US economy, the Fed on hold, and the rest of the world easing aggressively. It all adds up to a perfect situation for the US dollar.