Kiwi Busted QE And Its Relation To The Reflation Story

The generalized correlation between US$ oil prices and US$ exchange into NZD isn’t surprising given the connection to China via resources. Dollar financing, the dollar’s contribution to oil, and the eurodollar putting all the pieces together worldwide with the Chinese economy providing the planet’s central pivot for all those factors.

As noted yesterday and last week, “something” of late seems to have spooked the oil market which might also be attributed to negatives (rising perceived risks) in global money. Perhaps even more interesting, in a correlation kind of way, is that the level of (3m) contango in the WTI futures curve, a measure of reflation optimism in the physical as well as money realm, reach its absolute peak on…February 25.

Just like NZD.

It has been reflation-off in both ever since – even though New Zealand is hardly one of the world’s largest crude oil producers. If there’s a connection, it must be that “other” thing, the same factor which actually drives interest rates globally.

Eurodollars and the initial downside drag leading to havoc they often cause. 

In this case, the other side of them showing up in China’s currency:

To build a little further on the growing theme at NYMEX with crude prices, there’s a growing sense of quite a bit more going on beside maybe profit-taking after oil’s huge runup. These are, right now, slightly more audible than whispers, but growing evidence of the possibility the eurodollar world is shifting. A, so far, small accumulation of small warning signs.

And China would be, for me, the big reason why. The world was told (by the QE people, so there you go) to expect big things from the Chinese while the Communists shook their heads back in bewilderment. Their economy isn’t doing all that well and authorities aren’t going to do anything about it because, and this is the whole point, it’s been proven to be pointless.

The eurodollar, global dollar shortage has demonstrated time and again to be unassailable through any means – especially QE. Instead, falling interest rates are both the curse and the proof.

At some point, Euro$ #5. Is this that point? Might February prove to have been the inflection point, a la February 2018? There’s not nearly enough time nor evidence to make that determination, though the sounds are becoming more familiar to that ear. Stay tuned to all the eurodollar channels, including those that might not immediately spring to mind. Kiwi QE relating to reflation, for one. 

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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