The weak dollar was the catalyst for higher commodity prices last week. Bower says he expected the dollar to weaken as President Trump has said he wants capture trade back. “One of the ways to do it in the export market is to lower the valuation your currency so that you’re very price competitive in the world marketplace.”
When asked what ramifications could come from the dollar being so weak, Bower said there are 2 things that could potentially derail the plan. “First a ‘black swan’ event, which you can never really anticipate. If the dollar stays this low, it will probably lead to some degree of inflation.” Bower says that if inflation doesn’t get out of hand then the Treasury Department and Federal Reserve will just go along with it. But if inflation starts to rear its ugly head in a major way, “they could start raising interest rates relatively fast and that would put a stop to the whole movement up.”
Weather in Argentina and Brazil continue to be a factor. Bower says it’s a critical time for yield determination in Argentina and they’re already losing some of their first corn and soybean crop due to a lack of rain. It’s the opposite problem in Brazil. “If anything, there’s probably been too much rain in certain areas that were harvesting. It will hold up the planting of the second, or safrinha, crop so we will have to watch that it does interfere too much for the planting.” For more market strategy information, contact Bower Trading at 800-533-8045 or bowertrading.com.
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