Will US Equity Weakness of Last Few Days Continue?
I'd say yes, if the dollar continues its recent rebound. I noticed that the EURO/USD ratio is back below 1.40- today around 1.38. (That is almost a 4% fall in only the last few days) The US equity rally from late summer has correlated almost prefectly with the USD fall. ( I used $/euro as a proxy for trading partners with freely traded currencies.)
Interestingly, the buck stopped going down and the US equities stopped going up when G20 met and suggested that maybe they don't like L'il Ben and his QE2 plans as well as Krugman and our local cheerleaders do. In fact, it appears that they might have had enough of our cleverness and have some cleverness of their own to demonstrate.
Often counter- trend currency moves of this magnitude do persist for a while.
Ha
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