We entered the year expecting the dollar to find support on two primary drivers that is the mother’s milk for currencies:
Sounds crazy given that we knew:
US housing prices were still tumbling
Job growth was still not pretty, yet showing some improvement
Federal spending is a train wreck in the making (already made) to say the least
State and local governments are in big trouble as tax revenues plunge exposing their largesse (those $150k/yr fireman, city assistants, and other assorted union jobs in jeopardy; Mr. Market doing some overdue cleansing there.)
The Fed is still around; unfortunately we seem stuck with that 13-headed beast to do all it can to misallocated capital and screw up market signals sending money to its friends at the banks, and others along the food chain at precisely the right (read: wrong) time.
But, before you breakout into laughter, given that the dollar index has been steamrolled thus far in 2011, let us fit the other shoes …