With inflation ripping the way it is, it’s difficult to imagine a scenario where things get so bad that the Fed must step in, at least in the short term. 

At this point, the market will be listening very closely to whether he still sounds hawkish. He more likely than not will, and aggressively so. After all, the market recently had to deal with him coming out and saying that there will be pain. I don’t know that he could have gotten any more hawkish than he was, but whether the traders out there will pay attention is a completely different question. After all, this is a market that I think will have to pay close attention to whether we are going to become overly aggressive coming out of the United States. I think we are, so rallies at this point will more likely than not simply offer selling opportunities. After all, it’s difficult to imagine a scenario where the Fed suddenly changes its tune.

Interest Rate Differentials Favors de Dollar

With inflation ripping the way it is, it’s difficult to imagine a scenario where things get so bad that the Fed must step in, at least in the short term. However, there will come a time where they must and that could be the beginning of the end. In the meantime, the Europeans must deal with a land war that seemingly is only getting worse on the continent, so we are more likely than not will have to see lower pricing.

Fading the rallies has worked for quite some time, and I think that will continue to be the case. Ultimately, this is a situation where we continue to see parity attract a lot of attention, but longer term we must think about the idea of breaking down toward the 0.98 level. We probably go lower than they are, as we must worry about a complete disaster this winter in the European Union.

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