Markets Pull An Uno Reverse Card

Despite all the fear-mongering about the U.S. Dollar losing its status as the global reserve currency, it continues to trend higher relative to many other foreign currencies. 😱

As the global battle against inflation rages on and recession fears rise, market participants continue to find safety in U.S. Dollars. Given that real interest rates in the U.S. are higher than many alternatives around the world, demand for dollars remains strong.

Here’s a chart showing U.S. Dollar Index futures hitting their highest level since late 2002. 📈

As a reminder, this futures index is heavily weighted towards the Euro. Still, it is often used as a quick barometer to see how the U.S. Dollar is performing versus other developed currencies.

And on that note, the Euro/U.S. Dollar pair is approaching parity (1:1 conversion) for the first time in about twenty years. 💱

The U.S. Dollar is also faring well against Emerging Market currencies as well. For example, the WisdomTree ETF $CEW, a basket of 14 Emerging Market currencies, is approaching its all-time low set in 2016 and 2020.

And lastly, the so-called “best inflation hedges” Gold and Bitcoin are sitting at their lowest level of the year. 📉

In the face of all the “U.S. Dollar and cash are trash” rhetoric, it seems to be working pretty well this year compared to most alternatives. 👍

I guess we’ll have to wait for the Dollar’s impending collapse just a little bit longer… 📆

Commodities were the best performing asset class in the year’s first half, but some cracks are beginning to form in the “commodity supercycle” thesis. 📉

Today crude oil broke back below $100/barrel, with gasoline, heating oil, and natural gas trading well below their highs. 🛢️

“Dr. Copper,” which many use to forecast the economy, is working on its fifth consecutive weekly decline and trading at levels not seen since November 2020. 🏭

Corn, soybeans, wheat, and several other agricultural commodities have declined by 20%+ in recent weeks. 🚜

Supply has improved in several cases, but much of the recent declines have come on the fear that demand will drop drastically in a recession.

It seems like everyone is talking about a recession these days. Today the Bank of England told lenders to “brace for an economic storm.” ⛈️

And while many had hoped commodity prices would come down, prices falling due to a recession and massive drop-off in demand is not the ideal path. 👎

We’ll see how these trends play out in the coming weeks and months.

The debate remains whether these are sharp pullbacks within a secular trend higher in commodity prices. Or if we’ve indeed seen a meaningful peak in many of them. 🤔

As always, Wall Street analysts know exactly what’s next. We’re kidding, of course. 😂

Since we’re all just guessing anyway, head over to the streams and let us know your thoughts! 💭