The Greece worries have been lingering for months now. It seemed that every week, the media would report that a bailout plan was in place yet it still has not happened. It reminds me of the boy who cried wolf. One day reports say a bailout by the European Union is a done deal, the next day it does not happen. Back and forth we go. Then the media reports a bailout by the International Monetary Fund(IMF) and it still does not happen. Now the other PIIGS are starting to fall.
Today Spain has been downgraded by S&P to negative. Portugal was already downgraded. It is obvious that other nations are next to fall such as Ireland, and Italy. The Euro currency continues to get pounded against the U.S. Dollar. When the dollar rises it simply puts pressure on inflationary stocks and most commodities. Recently the Proshares DB US Dollar Index (NYSE:UUP) is higher by 0.77 cents since April 14th, 2010. While this may not sound like much this is a big move in the currency markets. Simply put, the dollar is only rallying higher due to the weakness in Europe.
The Currencyshares Euro Trust (NYSE:FXE) which tracks the Euro has sold off over 5.00 points since April 14th, 2010. Then we have the British Pound which is not doing much better than the Euro. The British Pound can be tracked by using the Currencyshares British Pound ETF (NYSE:FXB). While the British Pound is not part of the European Union the currency is in rather poor shape. However, it is trading off it’s March 25th, 2010 low of 147.48. The daily British Pound chart still looks weak.
The important point to remember is when the U.S. Dollar declines this will usually benefit the market. Watch an intra-day dollar chart and you will clearly see how the dollar and the stock indexes will often trade inverse to each other tick for tick.
Nicholas Santiago
Chief Market Strategist
InTheMoneyStocks
