Cryptocurrency prices continue to limp along in light of strong dollar and Federal Reserve action …

My morning takeaway: Biden appears unconcerned about a strong dollar. Powell appears unconcerned about his legacy.

Western governments are continuing their intervention initiatives for the purpose of supporting their currencies. This in response to the US dollar’s surging strength as a safe haven for investors.

Meanwhile, the Biden administration does not appear, at least in public, to be too concerned with the surging dollar. As of 10:43 am EDT, the dollar index, as reported by MarketWatch, was at 113.41. It is still relatively early in a Monday news cycle for any pressing news announcements out of the Administration.

Neither Celia Rouse, chairwoman of the Council of Economic Advisors, or Brian Deese, director of the National Economic Council, have publicly discussed the surging dollar and how it is being sought after as a haven for investors who are getting no love from the euro or the British pound.

From a trade perspective, the Administration should be concerned as to how two of their largest trading partners fare during the winter as concerns grow over energy shortages stemming in part from the conflict between Ukraine and the Russian Federation. Decreased demand for American goods and services may put a ding in the bottom-lines of American exporters, especially where there is not enough domestic demand to compensate for losses in export revenue.

Inflation in the United States will not help producers make up for lost export revenues as consumers find themselves prioritizing food and energy over other domestically produced products.

Fortunately for Mr Biden’s political economy, the vast majority of Americans have no where else to go. Being a digital nomad may be an option for a number of Americans, but even as foreign exchange rates between the US dollar, the pound, and the euro flirt with parity, Mr Biden realizes he has a captive audience that will opt for the greater availability of resources here in the U.S.

Between now and the mid-terms, Mr Biden’s best narrative is one that places the heat on the Federal Reserve System for the performance of the economy. If analysts are correct that unemployment will have to increase along with interest rates, all eyes and blame will be on Federal Reserve System chairman Jerome Powell as rising borrowing rates will likely result in job growth slow down or worse, layoffs.

Mr Powell could spare himself some grief by abandoning the strategic communications tactic of not commenting on fiscal policy. While taking the heat for an economic slowdown, he will be responsible for underwriting the debt necessary for financing Mr Biden’s inflation reduction legislation. Mr Powell has had opportunities to comment in public about the impact financing the initiative will have on taxpayers, but he has punted behind the argument that the Federal Reserve should not comment on fiscal policy. This position is unfortunate because it deprives decision makers of valuable insight and could likely taint Mr Powell’s legacy.

Alton Drew

26 September 2022

This morning’s news scan:

Foreign exchange. United Kingdom. British pound. “The British pound crashed to a record low against the US dollar on Monday on growing fears about the stability of UK government finances.” — CBS58.

Foreign exchange. China. yuan. “China’s central bank on Monday announced fresh steps to slow the pace of the yuan’s recent depreciation by making it more expensive to bet against the currency, as global policymakers grappled with the economic effects of a broad dollar rally.” — Reuters.

Cryptocurrency. Bitcoin. “As risk assets across the global economy take a hammering and the United States dollar surges, the largest cryptocurrency is on a limp footing. With crypto still highly correlated with stocks and inversely correlated against dollar strength, the outlook for Bitcoin is thus less than positive as the status quo looks set to remain.” — FXStreet.


Proprietary trading. “Prop trading is rising in popularity as it allows a trader to have access to significant trading capital without spending much of their own money. But not everyone is convinced that prop trading is worth considering, being just a way for prop firms to drain money from inexperienced traders. Is prop trading a good way to increase your trading profits or just a waste of your time and money?” — EarnForex.

Proprietary trading. “Digital nomad. Due to many online trading applications that popped up in the past few years, there are also many digital nomads who trade for a living. Many of these traders do it with their capital, though you must be an experienced trader with a proven track record and a successful trading strategy.

But fortunately, there are great solutions these days for beginner traders with no experience and knowledge in trading. One of these includes proprietary trading, which essentially refers to trading firms that allocate their capital to prop traders.” — Digital Journey.

Data per the U.S. Treasury:

2-year Treasurys: 4.20%

10-year Treasurys: 3.69%

Data per Board of Governors-Federal Reserve System:

Federal funds target range: 3.00%-3.25%

Effective federal funds rate: 3.08%

Bank prime loan rate: 6.25%

U.S. Dollar Index as of 10:43 am EDT: 113.41

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