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Global Macro: Markets Await Federal Reserve Answers

The dollar has continued higher as the economic picture has improved, and some have cited that fears of Federal Reserve tightening could be playing a role as well. The reality is that economies across the globe are in dire situations and have chosen wide-scale easing measures in an effort to provide some respite to their respective economies. The Fed chose to ease long ago, and has seen tangible economic benefits because of this.

The pair below is of the DB USD Index Bullish (UUP) over an equal weight DB Commodity Index Tracking Fund (DBC). The price action highlights the thesis of a stronger dollar.

Although easing will most likely be continued, in the long run, the dollar remains on an upward trajectory, as foreign central banks continue to ease and the U.S. economic picture continues to brighten. This should weigh on commodities such as oil and gold, which are priced in dollars. The pair will continue higher, as long as the U.S. remains the strongest of the recovering economies.

The last pair is of SPDR Gold Trust (GLD) over an equal-weight DB Commodity Index Tracking Fund. Gold has been on a strong down trend recently, as commodities have been pressured by a stronger dollar.

Gold has also fallen due to lower CPI projections worldwide. The pair spiked on a weaker dollar on Monday, but the continued uptrend in the dollar, due to reasons stated above, should push this pair below multi-year lows.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a senior at Georgetown University earning a degree in Economics.
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