The Federal Reserve Is Stuck Between A Rock And A Hard Place
We have all seen this act before, the U.S. Dollar Index makes an early move higher and then declines sharply from its intra-day high. Well, this is exactly what occurred today around 10:30 am EST as the U.S. Dollar Index pulled back. The effect from the intra-day dollar decline was a sharp move higher in most commodities.
WTI oil surged higher by $5.37 to $102.55 a barrel. That is a rally of more than 5.00 percent on the session. The United States Oil Fund(NYSE:USO) is trading higher $1.73 to $40.60 a share. The iPath Dow Jones UBS Copper Total Return(NYSE:JJC ) also benefited from the U.S. Dollar Index pullback. The JJC rallied higher $1.03 or $53.30 a share. Gold and silver also surged higher this afternoon. Silver was the big winner rebounding over 6.5 percent to $36.78 a share.
The Federal Reserve seems to be stuck between a rock and a hard place now that the market leading commodities are trading inverse to the U.S. Dollar Index. If the U.S. Dollar Index was to decline or pullback further the commodity complex looks as if it would go wild to the upside once again. High oil, gasoline, and other commodity increases will eventually have a negative effect on the inflation rally by the central banks.