Larry Kudlow’s Strong Dollar Is Easier Said Than Done

Larry Kudlow, the newly appointed White House economic adviser, has made it clear that he supports a strong dollar. Minutes after his appointment on March 14, he even offered a trade based on his policy ideas: “I would buy King Dollar and I would sell gold.” History suggests that if Kudlow is able to follow through with his policies to create a stronger dollar, this trade will likely work out for investors. From 1974 through the end of 2017, a Federal Reserve index tracking the dollar has increased in 25 calendar years and fallen in 19 of those annual periods. The average annualized returns for gold when the dollar was up in a given year was minus 1.7 percent. In the years when the dollar index finished down, gold was up an annualized 16.4 percent. So gold does much worse in a rising dollar environment. In fact, the correlation of the prices of gold and the dollar is minus 0.6 since 1974, signaling a strong inverse relationship between the two. A strong dollar would also likely benefit U.S. stocks but hurt foreign shares held by U.S. investors. Those who own international stocks are subject to currency fluctuations. You’re subject to the fluctuations of the local currency in which you invest when it gets converted into dollars, unless you’re invested in a currency-hedged fund. When the dollar is strong it can hurt your international holdings and when the dollar is weak it can help them. Read More @ https://www.bloombergquint.com/view/2018/03/20/larry-kudlow-s-strong-dollar-is-easier-said-than-done

The Fed Is Signaling More Than 3 Interest Rate Hikes for 2018

Market participants are preparing for the Federal Reserve to raise its forecasts for interest-rate hikes when it releases its Summary of Economic Projections this week. Rather than focus on the projections themselves, pay attention to the risks they imply. Is the Fed more likely to raise rate expectations further as the year progresses, or will policy makers back down to the three rate hikes projected last December? In recent weeks, the Fed has signaled that the former is more likely than the latter. The case for a gradual removal of financial accommodation remains largely intact. Firmer inflation in recent months gives the Fed confidence that it will meet its 2 percent target within the next year. And the Fed is also fulfilling the other part of its dual mandate: Unemployment is holding steady at 4.1 percent even as job growth picks up steam along with the broader economy. The additional workers arising from increasing prime-age labor force participation both prevent further unemployment declines and, with stagnant wages, undermine claims that the economy is at or beyond full employment. Read More @ https://www.bloombergquint.com/view/2018/03/20/the-fed-is-signaling-more-than-3-interest-rate-hikes-for-2018

WHAT IS THE USD INDEX SAYING?

As we said yesterday the USD will hand around $90 before the FOMC; tomorrow at 2am Hong Kong Time – we should see some heavy volatility in favor of the USD. We maintain BUY for USD this week.

TODAYS’ NEWS THAT MIGHT AFFECT YOUR TECHNICAL TRADES.

  1. 5.30pm – UK will release Average earnings Index – which is an important data from UK and is also a economic leading indicator for Bank of England. AFTER bad news from UK on CPI – GBP stays fragile now. We wait till the FOMC is over.
  2. 8.30pm – US will release the Current Account and is expected to be weak. Little movement expected due to FOMC.
  3. 10.00pm – Home sales in teh US is expected to be good.
  4. 10.30pm – US will release the Crude Oil and is expected to be in favor for the oil as we are expecting the Inventory to be very low. We buy oil.
  5. 2.00am – THURSDAY MORNING – FOMC – we are expecting the rate to go up – however the pricing in is already done but the FOMC CONFERENCE at 2.30am will give the the FX Market a massive volatility. We are in favor of the USD.
  6. 4.00am – New Zealand will go to action with the Rate – we are expecting no change to the rate after a poor GDP early this week.

Overall the market will be fragile today; we recommend traders to trade after the news and always observe good money management at all times.

High Risk Investment Warning:

Please note that Forex and other leveraged trading involves significant risk of loss, It is not suitable for all traders and you should make sure you understand the risks involved, it is recommended that you seek an independent advice, if necessary

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