Currencies React To “Liftoff”
November 9, 2015
Dennis Gartman has been directly involved in the capital markets since 1974 and has been publishing his daily commentary, The Gartman Letter, since 1987. Mr. Gartman is a strategic partner with the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN) and lends his institutional insight to educate advisors and investors about trading gold in different currency terms.
The US Dollar is rather obviously sharply higher following the still somewhat surprising Employment Situation Report released last Friday which has shifted the odds of a Fed tightening at the December meeting from something that was perhaps just under 50:50 to something that is now a bit over 75:25. “Lift off” is not guaranteed at this point, but clearly it is far more likely than it was.
That said, we note firstly that all of the currencies we mark at TGL on a daily basis have fallen relative to the US dollar, save for the Brazilian Real which is marginally higher. Such unanimity… or actually near unanimity… of price movement is less and less rare these days than in the past but it is still unusual, and certainly the size of the dollar’s gains is even more interesting given that it is so infrequent in the world of forex dealing to have full percentage point movements by the Yen, or the Aussie dollar, or the Mexican Peso, or the Russian Ruble as we have had since our “mark” of Friday morning. At this point, any and all residual strength in the EUR and or the Yen relative to the US dollar is to be sold and henceforth the proper trading thesis shall be that weakness in the US dollar, however modest, is to be bought while strength in the dollar is not to be sold into, or if one does sell the dollar one should be certain to sell a good deal less than what one had purchased previously.