The dollar proved to be almighty yesterday as its rally stopped just about all other asset classes from advancing.
Gold was up initially but reversed course; crude oil fell back and bonds dropped due to a rise in interest rates. And, as usual, the stock market slipped as the dollar headed higher.
Amazingly, the dollar’s rally happened despite a downgrade for U.S. debt by China’s Dagong Credit Rating Company. It reduced its credit rating to A+ from AA and cited a “deteriorating intent and ability to repay debt obligations” in view of the Fed’s recent stimulus plan. Ouch; you can’t get much more direct than that…
On the menu is the G-20 meeting on Thursday, which could affect the markets. Items to be discussed may be not only be the U.S. economy but also the debt issues of Ireland and Portugal.
While those meetings are usually nothing more but useless jawboning with no definite results or accomplishments, we may very well hear a little more name calling and/or mudslinging in view of the Fed’s questionable stimulus plan. Stay tuned.