View from London: Will USD Reversal Prove Positive for Stocks, Bonds?


Robert Savage Image Robert Savage Partner & CEO, CCTrack Solutions

The U.S. focus on inflation may be through commodities. The driving force for good inflation should be wage demand if you believe central bankers while the bad inflation is all about food, energy and pass-through from companies, says Bob Savage, CEO of Track Research.

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The U.S. dollar rally stalls and some are seeing dead-cat’s bouncing. However, today is about inflation in the UK and Sweden – the British pound (GBP/USD) has gained to the best levels in a year at 1.3282 vs. USD and breaks below 0.90 vs. US dollar/euro (USD/EUR) as CPIH rises to December 2011 highs.

Sweden also saw higher CPIF 2.3% y/y and euro/Swedish krona (EUR/SEK) is off to 3.5290 – the biggest drop in a month.

The USD gains from yesterday wobble thanks to these moves as we now wait for Thursday CPI from the U.S. The larger question to ask for investors and traders is whether we are seeing a shift from concerns about politics and growth to fears about inflation and weaker forex. The moves today suggest we are at that turning point where pricing power is everything. The bond market move Monday is continuing today and that perhaps is the key as some central bankers remain in control of the markets and others less so.

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