Thursday, March 12, 2015

The U.S. Recovery and the Fed - Global Concern

The euro sank below $1.05, a new 12-year low, last night briefly, before recovering above $1.06.

As the markets reflect Friday's good BLS report on U.S. jobs and unemployment, the likelihood of higher interest rates in the United States later this year is being discounted.

Money is flowing into dollar bonds out of bonds in Europe, where yields are falling.

The strong dollar is good for American tourists in Europe (not so much Britain, as sterling is also strong). It is also good for the ailing European economy, as is the U.S. recovery.

All eyes are now on the Federal Reserve, which has had its hands tied since 2008 trying to help the U.S. financial markets recover - with near-zero Treasury bill rates and then a quantitative easing program to try to lower bond rates. Europe and Asia are worried that if the Fed's likely move to higher rates within a few months is premature, it will damage the recovery in the United States and world-wide.