Goldman Sachs believes the U.S. dollar will catch up to the Euro and may even be equal by the end of the year.
This is just one outcome of a resurgent America in comparison to the European Monetary countries that are having all kinds of difficulty. While we ended our bond buying program, they’re just about to start.
This is good news for US travelers to Europe but bad news for big multi-national companies that do lots of business overseas as they convert back into US dollars.
I remember the 1998 Russian crisis well. It was near the end of the summer, and threatened to put a real damper on an otherwise excellent stock market year. The “Moscow meltdown” bled over the S&P 500, which plunged 20%.
There are reasons 1998 and today are different
Tough sanction in place have somewhat isolated Western investors
Russia has a war chest of $416 billion in currency reserves today, versus very little in 1998
Russia’s currency is free floating, and not pegged to the US Dollar like in 1998. External shocks can be absorbed by the currency markets.
There are other worries in the world we can be concerned about, but Russia collapsing and spilling over to us like 1998 isn’t one of them.
As I mention in my video, the price of bonds (in general) have decreased causing yields to increase. The above graph shows comments from the Fed which has led so many people to have speculated they’d cut back on the bond buy back.
As of last month, the Fed Chairman has stated the bond buy back will stay in place.
For more graphs and a discussion, here’s the full article.