ECB, FED, and the US Dollar: Insights into Central Bank Policies and Currency Dynamics

The latest ECB notes were quite revealing and may hammer the US dollar into a major downtrend. The ECB is very strong on the need to do more as it fears inflation remains out of control. According to its latest minutes.

Very good for the Euro. Not so much the European economy. Industrial production slowed to just 0.2% in May from 1,0%.

What I have been warning of for some time and not alone in doing so is that the ECB, Fed, RBA, have all gone beyond the tipping point where economies get crushed  by both higher prices and higher rates.

While we look for a terminal rate on the horizon somewhere in sight for the US, the ECB is still full speed ahead over that horizon. Coming on top of other causes for dismay with the USA, this will only further amplify US dollar weakness. Thereby potentially re-kindling inflationary pressures, and significantly boosting global Gold and Oil prices.

Just to round out the idea that the Federal Reserve will be hiking at least one more time, the new jobless claims data came in lower. Pointing to a firm enough labor market to justify another attack by the Fed on that way too high core 4.8% number.

For a spectacular snap-shot of where the world economy is at, and where it is going, look no further than China exports. Always more about the rest of the world than China itself, they are in decline again.

This is what the global economy truly looks like right now. And it is still headed south.

Something to think about amidst the heady mix of euphoria over just the lower headline inflation number.

US Producer Prices have most definitely stabilised in the US. Up just 0.1% in June. However, let’s see how those further down the supply line and services pricing forces continue to play out. This is where the nightmare for the Federal Reserve lives.

We have slowing exports from China, flat industrial output in Europe, manufacturing recession in the USA, and very keen to hike again western central banks?

Enjoy the upside momentum in equities for the moment, but do not get caught looking away from the down there on street level economic slowing.

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