Impressive drivers continue to surface for the U.S. dollar. And the impact lingers on many fronts.
One
measure is the recent positive U.S. jobs report. This adds to the
dollar's already bullish tone as it dials up pressure on the Fed to
raise interest rates in the months ahead.
2015 ended on a hiring spree with nonfarm payrolls up 292,000 in December keeping the unemployment rate at a solid 5%.
Annual GDP, a measure of the economic growth rate, is another positive marker.
U.S. GDP expanded at a modest rate of 2.10% in the 3rd quarter. Though
not stellar, but compared to other G9 economies (Europe's at 1.60%,
Japan's at 1.60% and Canada's at 1.20%), the U.S. is growing.
In comparison, China's post 2009 GDP peaked at 12% and is now at 6.9%, a 48% decline in 6 years.
However, as the U.S dollar continues to have positive tailwinds, the impact on other currencies is not so constructive.
The Euro has declined 23%, the Yen is down 14%, the Australian dollar is
off 25% and the Canadian dollar has dropped by 29%, all within the last
18 months.
The price of Light crude oil, another casualty of the rising US$, is off
by a staggering 69% since mid-2014. Projections point $27.50 as the
next downside target.
Bottom line: Positive drivers continue to advance the U.S. dollar verses
other G9 currencies. Impressive employment gains and GDP numbers are
just some of the markers that are pushing the US$ higher.
The USA is the first of the G9 economies that is feeling confident
enough to begin rising its interest rates. And with solid fundamentals,
the Fed will be under pressure to keep raising rates in the months to
come.
In response, many world currencies and commodities will continue to feel strong headwinds in the months ahead.
