Today's job report came in much better than expected, but what has continued to go as expected is the US Dollar's rally. While the jobs report today changes the mindset of market participants concerning the Federal Reserve's stance on interest rate policy, the fire for continued US dollar strength was already ignited. Today's report merely fanned the flames.
Just a few weeks ago the US Dollar was coiling up to spring to new highs, it did not disappoint breaking swiftly out of this beautiful pennant formation:
The FED's easy money policy has spread quicker than a Youtube Video of a Twerking Kardashian. The unprecedented monetary policy of 2009 has turned into normal Central Bank action in 2015. The answer to any economic issue these days is cheap money and Central Banks around the globe are doing all they can to cheapen their currencies. It seems every day a different Central Bank is lowering it's interest rate. This is strengthening the US dollar.
Today's job report highlighted the dilemma facing the FED as they try to 'normalize' interest rates. The dollar is already at an 11 year high. It continues to get stronger. But economic data is showing that the need for unusual policy is waning. If the FED does not take The Pacifier, The training wheels. The Punch Bowl...... away it risks losing it's credibility.
In 2009. 2010, 2011 market pundits, including myself, were scared stiff about the value of the US dollar. The FED seemed hell bent on turning the US dollar into toilet paper. Helicopter Ben was going to ruin the reserve status of our currency. He was dropping barrels of Dollars from his helicopter in hopes of stoking growth. Helicopter Ben's actions seem to have helped our economy come out of the worst recession since the Great Depression. However the US Dollar did not fall as far as everyone thought. It did not lose its reserve status. Instead every other Central Bank in the world has taken the baton from the FED and run with it. Ben's Helicopter is now flown by every Central Bank head in the World.
Those scared of a weak US dollar a few years ago are now wondering just how high the dollar will go. How strong will it get. And even more importantly what will happen if the FED does raise rates?
Since the market bottomed in 2009, it has endured countless headwinds throughout this once in a lifetime bull market. Wars, terrorism, financial crisis, natural disasters... we are headed for the next one. A runaway US Dollar. The only way to stop it will be to embark upon the currency manipulation of the rest of the world. World War III will be fought with Dollars, Yen, Yuan, and Euro's. Let's see if General Yellen has what it takes to win the war.