Economy
January 28, 2015
Currency Update for Steel Trading Nations
Written by Peter Wright
Turmoil continues in the global currency markets as the European Central Bank announced a quantitative easing program last week, S&P downgraded Russian debt to junk status yesterday, the Greek national election on Sunday will result in a strong resistance to EU mandated austerity programs and the Swiss removed the currency cap vs the Euro last week.
The monthly value of the Federal Reserve Broad Index value of the US$ against our major trading partners has continued to strengthen and in December passed 90 for the first time since July 2009. The monthly BI is a “Real” inflation adjusted index. The Fed also reports a daily nominal, (non-inflation adjusted) index. On February 3rd 2014, the value for the daily index was 103.8026, the index then weakened, turned around at mid-year and on January 23rd (the last date published by the Fed) had reached 113.374 the highest value since March 12th 2009. As an example of how data can be “Spun” it is interesting to compare the long term and short term history of the US dollar’s strength. Figure 1 shows that in the short term, (4 years) the value of the US$ underwent steady appreciation for the first 3.5 years and has shot up strongly in the last six months.
