Whichever way you look at it the USD is getting “pummeled”. For the 2nd day in a row it made a new multi-week low. Now that it is through its last line of support the gates are open to the next level at about the 70 level. The 70 level would equate to parity with the Aussie and Canadian. Is the falling USD driving stock markets higher or is a higher stock market coincidental with a falling USD? We don’t know for sure and don’t want to speculate. We do know that if history is anything to go by there is little relationship between the USD and the US stocks market (and by default world stock markets). However, there definitely seems to be a relationship right now and it appears that the USD is acting as a leading indicator for the US stock market. But wait there is more! It also appears that the Aussie Dollar is acting as a leading indicator for the USD Index, as the Aussie goes up the USD Index falls…….commodity and equity markets rise.
So perhaps the most important indicator in world markets right now is the Aussie Dollar? We will put our necks out and say that everything will be ok for equity and commodity market bulls, US Dollar and US Treasury bears and corporate bond bulls so long as the Aussie keeps strengthening…….of course it won’t continue to do so for ever but it may well go to parity with the USD in the meantime.
