The dollar’s move to the downside in recent weeks has been good for U.S. equities, commodity prices, and precious metals, and it has given inflation stories a boost, but what looks like dollar weakness may actually be euro strength flowing out of recent policy actions, Roger Hirst said during today’s Real Vision Daily Briefing.

Hirst said certain EM currencies are still weakening versus the dollar and the ECB and BOJ may find it difficult to hit their inflation targets should their currencies continue to strengthen. If either acts to weaken their currencies as a self-regulating mechanism because they’re not hitting their inflation targets, the dollar may once again rally. And if that happens, some of these inflation stories could see some profit-taking and a sharp move back, he said.

Hirst believes the uptick in inflation we’re seeing is a result of pent-up demand rather than a real structural issue. He said this is a pent-up demand effect that we’ve seen in countries whose currencies have gone up and gone down, which Hirst said tells him it’s not that true fiscal story of fiscal expenditure and central banks printing money to create a huge leg higher in inflation. He believes that’s to come somewhere in the 12 months ahead.

Going forward, Hirst is watching for EM currency strength; if EM currencies start to properly strengthen it is a signal that we’re not just in inflation but reflation. In true times of global reflation, the dollar is on the back foot and other currencies outperform, he said.

If EM currencies start to really catch a bid versus the dollar then we keep with the inflation trade: we keep the gold, we keep the silver, we keep those sorts of trades, he said. If they don’t, we will likely see the euro reverse.

READ ALSO  IMF Sees Oil Prices At $40-50 Next Year

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This is pretty obvious, but we should probably say it anyway so that there is absolutely no confusion… The material in REAL VISION GROUP video programs and publications (collectively referred to as “RV RELEASES”) is provided for informational purposes only and is NOT investment advice. The information in RV RELEASES has been obtained from sources believed to be reliable, but Real Vision and its contributors, distributors and/or publishers, licensors, and their respective employees, contractors, agents, suppliers and vendors(collectively,”Affiliated Parties”) make no representation or warranty as to the accuracy, timeliness or completeness of the content in RV RELEASES. Any data included in RV RELEASES are illustrative only and not for investment purposes. Any opinion or recommendation expressed in RV RELEASES is subject to change without notice. RV Releases do not recommend, explicitly nor implicitly, nor suggest or recommend any investment strategy. Real Vision Group and its Affiliated Parties disclaim all liability for any loss that may arise(whether direct, indirect, consequential, incidental, punitive or otherwise) from any use of the information in RV RELEASES. Real Vision Group and its Affiliated Parties do not have regard to any individual’s, group of individuals’ or entity’s specific investment objectives, financial situation or circumstances. RV Releases do not express any opinion on the future value of any security, currency or other investment instrument. You should seek expert financial and other advice regarding the appropriateness of the material discussed or recommended in RV RELEASES and should note that investment values may fall, you may receive back less than originally invested and past performance is not necessarily reflective of future performance.Well that was pretty intense! We hope you got all of that – now stop reading the small print and go and enjoy Real Vision.

READ ALSO  UK Bans Sex For At-Risk Couples



Via SeekingAlpha.com