US Dollar Continues To Get Thrashed Against The Euro

The USD is getting killed against the EURO, in case you haven’t noticed lately.  As the US continues to sell more UST’s into the market and foreign buying is drying up, it’s making the dollar go right down the proverbial chute.  The UST auction of the 23,24,25 of August saw the dollar chop sideways against the EURO. It appeared to be holding.  The Auction of 8,9,10 saw a EURO breakout of close to 300pips.  The EURO appears to be breaking out again, with the auction scheduled for Tues, Wed, and Thursday of this week.

The unfortunate part of this is that with exploding deficits, it doesn’t appear that there’s any end in sight to the UST auctions.  It appears that they will be a way of life for quite some time.  This doesn’t bode well for the dollar, inflation or equities.

The huge bounce in the equity market was a combination of “snap back” - buying the dips etc.  When the market commenced its bounce, the Treasury had not yet stepped up the UST sales.  While the market was bouncing the FED was handing out money.

In my opinion, the pain of the borrowing had not yet been felt.  I think that the pain is starting to become evident.  We’ve seen less participation in UST auctions, a rapidly shrinking dollar - all while unemployment has remained high at 9+%.

Interest rates have nowhere to go but higher.  When the FED stops purchasing treasuries, I think that we’ll witness higher rates.  As rates move higher, slowly it will have an impact on the stock market.

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