The $US has broken out of its long term downtrend, though its likely to test its lows as oil prices and Asia`s mercantilist policies conspire to boost the US deficit. In the short to medium term however the US economy is growing strongly and the Fed is raising rates, so with the Eurozone recording subdued growth - except a stronger $US. The Japanese economy is looking stronger, however the Yen will look weaker as long as the rate differentials with the US remains substantial.
Higher deficits or lower interest rates could eventually bring the $US back to its Y86 low. For the meantime, the US remains a growth story. Nevermind that the bulk of the jobs created are in the service sector and will disappear with the forthcoming collapse in household consumption.
- Andrew Sheldon www.sheldonthinks.com
Thursday, 18 August 2005
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