Fiscal Expansion Underway
There’s a U.S. fiscal expansion underway in 2016. The recent budget agreement is lifting some of the austerity seen under the sequester and adding new spending as well. The Congressional Budget Office is looking for a $300 billion in increased Federal Government outlays in FY. That would be more than double the increase we saw in FY 2015, which was a year that the dollar traded basically in a sideways range.
The fiscal expansion will be bullish or the economy and finally put a floor under foreign import pricing.
China Is Not the Factor
Right now the markets are being roiled by news out of China and a perceived slowdown in the U.S. economy. Whether the latter is real or not only time will tell.
The selloff in stocks is creating a flight to quality and the quality this time is the Japanese yen, where the dollar has fallen to the lowest level in a year. The USD is strong, however, against dollar block ad GBP, where China fears and weak economic growth in Britain, continue to suppress those currencies. However, those may be wonderful longer-tem opportunities.
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