> The interest rates on three-month euro cross-currency basis swaps, in which one party borrows a currency and lends their own in return, have turned more negative in recent weeks. That means traders in Europe are paying a premium to exchange excess euros for dollars.
Demand for dollars is on a tear, sending the value of the dollar higher. You can see this in the DXY, an index of the dollar's value against a basket of other currencies:
https://www.tradingview.com/chart/?symbol=dxy
This inconvenient fact about the strengthening dollar is swept under the rug by those focused on inflation and their claims that the US is headed for 1970s stagflation at best, or Weimar 1920s hyperinflation at worst.
Also conveniently swept under the rug are the deeply negative yields on 10-, 20-, and 30-year treasuries.
And then there's gold, which has failed spectacularly as an inflation hedge. If the inflation threat is real, gold doesn't give a flip about it because the price hasn't moved in one year. For that matter gold is about the same price in nominal terms that it was ten years ago.
These three markets, gold, treasuries, and the dollar, don't fit the money printer go brrr narrative. What gives?
What gives is that the Fed isn't printing money and lacks the authority to do so. QE is not a printing press. It doesn't conjure money into being. QE can't cause inflation and its effects on long-term interest rates are questionable at best.
The dollar, debt, and gold markets are signaling that the next major move is toward slower growth and lower inflation. Maybe a lot lower.
Whatever the Fed announces or doesn't announce tomorrow is mostly theater.