Over the last several years the Federal Reserve (now along with other countries) has embarked on a program (QE- Quantitative Easing) to buy fixed income assets in order to lower interest rates. The US is the first to begin unwinding this QE, and there are a few consequences, the culprits now, US Dollar and Currencies.
Currencies move back and forth, the issue is not movement, but the magnitude of the movement, and the speed at which it has occurred.
The first QE side affects are now showing their teeth.
US Dollar Rally Continues
Today the FOMC (Federal Open Market Committee) ends a two-day meeting and will give hints about increasing interest rates. One of the items they may address is the increase in the dollar versus …. basically the world !
The Bad News: This makes anything in international dollars lower in value …. Very hard for international companies to compete (in the short-term.)
The Good News: Great time to travel overseas … More importantly, this is most likely temporary and will eventually normalize (flatten or go the other way.)
Bottom Line: Headwinds for international markets and foreign companies … For now! (Many investors have begun to chase/all in on this trend … wrong… let it self correct!)
Have a Great Day!
John A. Kvale CFA, CFP
8222 Douglas Ave # 590
Dallas, TX 75225