A couple years ago – Pete suggested I look closer at the relationship between the stock market levels, oil prices, and the value of the dollar.
My preferred metric of measuring the strength of the US Dollar is it’s value relative to the Euro. As I write this – 1 USD = .70 Euro. While I’d prefer their values to be equal (the result being the effect of a single global currency and an interesting conversation on global pricing) – I think the USD is undervalued until it passes .80 Euro.
Over the past week, the USD has increased in value from .68 to it’s current .70.
Along the way oil, US stocks, and other commodties prices – including gold – have decreased. Basically anything priced in US Dollars and traded globally.
Fewer (strong) Dollars are needed to purchase the same quantity of these goods.
As the dollar continues to climb – it will continue to have downward pressure on these prices.
Where it gets interesting is when both prices and the USD’s value are increasing.
The earliest we could see that is this autumn.