US Dollar rallying in the middle of news that U.S. consumer confidence fell more than forecast in April to a 26-year low – what does it mean?
Sam Adelton
Apr. 25, 2008

Any thing that turns bullish in the middle of bearish news is bullish. US Dollar rallied in the middle of the most bearish news possible. Record fuel prices and rising unemployment threatens to reduce spending. The economic downturn can force the Federal Reserve to lower rates. Then why is US Dollar rallying?

The Reuters/University of Michigan sentiment index decreased to 62.6, from 69.5 the previous month. The measure was down from a preliminary estimate of 63.2 issued on April 11.

US Dollar dipped slightly and then smartly started rallying back. The stock market also shrugged off the super bearish news. The same happened in lumber futures that correlates nicely with the new home sales with a little forward phase added to its cycle.

US Dollar is fundamentally undervalued. It is in a new bull market. Silently US trade deficit is decreasing. While inflation is a major problem for the rest of the world, in US it is less of a problem.

The valuation of a currency depends on a cycle specific function of the difference between interest rates and inflation in that country. Based on that, US Dollar is far below its real value.

US Dollar rallying in the middle of news that U.S. consumer confidence fell more than forecast in April to a 26-year low – what does it mean?
Sam Adelton
The valuation of a currency depends on a cycle specific function of the difference between interest rates and inflation in that country. Based on that, US Dollar is far below its real value.
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