The US Dollar is clearly back in rally mode after suffering a setback in December. As shown in the first chart below, the Dollar index has now broken well above its 50-day moving average and appears to be heading back to its November highs. Unfortunately, rallies in the Dollar have recently coincided with declines in riskier assets like equities.
But the bigger news in currencies is the dramatic fall that the British Pound has recently experienced. Today the Pound is suffering another big drop, and as shown in the first chart below, the currency broke below recent support levels as well as the $1.40 mark. And the bottom chart shows just how much the Pound has fallen in such a short period of time. In late 2007, the Pound was trading at record highs versus the US Dollar. Now it is trading very close to its lowest level since 1991. Anyone in the US that has the money to go to England can stay there on the cheapest tab in decades.
if you had shown the last 17 years of the dollar index like you did for the gbp it would look much less bullish though..
Posted by: alessandro | January 20, 2009 at 03:29 PM