I mentioned yesterday in my comments that the Dollar was very weak even in the midst of what was most certainly a day in which risk trades were being pulled off and a rush to safety was underway.
Normally during such events, the Dollar along with the Japanese Yen, tend to be the beneficiaries of such activity. All that the Dollar could do was to end up a few points after spiking initially almost 100 points higher. That sort of activity was very telling and indicates that the safe haven bid for the Dollar was practically non-existent.
Today, with crude oil soaring, the broad equity markets, particulary the Nasdaq, getting slammed, and increasing unrest in the middle East as fear grows about the stability of Saudi Arabia, the Dollar is actually getting sold off. That is most remarkable.
I am thinking that the market is looking at the fragile state of the US economy and voting that rising oil prices are going to hit the US harder than most others. Keep in mind, that this is an "economic recovery" built almost completely around the Fed's massive liquidity injections through its QE program. That liquidty is being eaten up by rising crude oil prices as if by a munching PacMan.
It is as if the Fed is pouring water into a container full of holes punched in it by a awl with the words "crude oil" engraved on the handle.
As I am writing this, I am also noticing that the long bond is fading quite dramatically from its best level of the session. That too will bear watching.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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