Currency Wars?

Wow, I've just been so shocked at the disparity between the minutes from the June meeting and Bernie's after hours comments.  I've heard some "possible" explanations like the whole "Accommodative is appropriate" (or words to that effect) simply meant that even after a taper or even the end of QE, that rates wouldn't be jacked up until late 2014 or even 2015 and as such, "accommodative policy" is still in place so Bernie didn't really contradict the minutes. That's really parsing words in my opinion, but I think it shows the lengths people are willing to entertain to explain away the disconnect.


What I have seen a lot of as I watch the futures and currencies is absolute $USD destruction, as a result oil, gold, equities, all of the usual suspects have popped higher (and I'll just throw this out there preliminarily, there are some signs emerging that this after hours move is just as likely to be a trap - not an intentional one unless the locals knew what Bernie was going to say, if evidence continues to build to the point I think it's credible, I'll post it).

However in the world of exports, GDP, etc (as China was slammed last night), a devalued currency is great for your country's exports.  On July 4th both the BOE's (Bank of England) chair, Carney and the ECB's (European Central Bank) Mario Draghi both set the tone to devalue their currency and both currencies fell vs the $USD.

 EUR/USD

GBP/USD

So far I count a 349 pip move (from Bernie's comments to the EUR/USD high), on March 18, 2009 when QE1 was expanded to include Treasuries (it had been MBS alone before that) which was also the market bottom, the EUR/USD moved 370 pips, I just counted a move or nearly 350 pips.

So far this is the best explanation I've seen... "Was this Bernie's revenge?"

 Closer look at the EUR/USD

The Euro Single Currency (Germany WILL NOT be happy about this- especially Merkel)

 The $USDX

A wider look at the $USDX...

Staying competitive? Revenge...?

We all know currency devaluation is the name of the game, that's why the G7 couldn't call Japan to task too hard because their all doing the same thing.