Yesterday, the markets had their biggest decline in two months. The reason behind this decline was the surprise move by China, raising interest rates. This caused the Dollar to spike dramatically higher, crushing the U.S. markets. Yesterday was the first day in two months where it did not seem the Federal Reserve was in control of the Dollar, and POMO (Permanent Open Market Operations) did not work.
Today, the Federal Reserve is flexing their monetary muscle as the U.S. Dollar has been slammed back down, negating almost all of the upside yesterday. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $22.39, -0.31 (-1.37%). In tune with a drop in the Dollar, the markets are surging to the upside as well, erasing a majority of the losses from yesterday. The SPDR S&P 500 ETF (NYSE:SPY) is trading at $117.84, +1.11 (+0.95%).
The Federal Reserve is flexing its muscles after China did so yesterday. The currency war that will inevitably end in hardship for the small investor and average American is fully underway. The Federal Reserve wants a weak Dollar, China, who owns a trillion Dollars in U.S. debt, does not. Treasury Secretary Tim Geithner yells at China daily on ‘currency manipulation’, while China thinks the same of the U.S. Now that the weak Dollar policy (currency manipulation) is in full swing.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
