As many of us all know by now when the U.S. Dollar Index declines the major stock market indexes will inflate and trade higher. Yesterday all the major stock indexes sold off from their intra-day highs as the U.S. Dollar Index rallied higher late in the afternoon. When the U.S. Dollar Index rallies or trades higher the stock markets around the world will simply deflate and decline. Today the U.S. Dollar Index is starting the trading day slightly higher and this has put pressure on the stock market futures at the open of the trading session
Should the U.S. Dollar Index decline intra-day it would be prudent to expect the stock markets to inflate and trade higher. The opposite would be true if the U.S. Dollar rallies intra-day the stock markets will likely stall out or decline. At this time the problems out of Europe continue to grow and this is something that could strengthen the U.S. Dollar Index. Therefore, keep one eye on the European markets at all times.
The U.S. Dollar Index is a weighted mean of the dollar’s value compared with six other major currencies. Listed below are the six currencies and their weighting:
Euro(NYSE:FXE), 57.6% weight
Japanese Yen (NYSE:FXY) 13.6% weight.
British Pound (NYSE:FXB), 11.9% weight
Canadian Dollar (NYSE:FXC), 9.1% weight
Swedish Krona (NYSE:FXS), 4.2% weight and
Swiss Franc (NYSE:FXF) 3.6% weight.
