Currencies have been on the move as of late. China, Europe, Japan, and many emerging economies have all seen their currencies fall in recent weeks.

Notice that the US was not on that list… Among the reasons for the global slip in currency comes from US data.

US
GDP data released on Friday was the highest it has been in nearly two years, coming in at 2.8%. This is a potential sign of strength for year end. Strong GDP stemmed from inventory builds, which should translate into strong consumer spending in coming quarters. This information speaks to strength in the $, a trend that will likely continue in coming weeks. Reason being, the strong GDP data has further strengthened the case for a rate hike in December.

Battle 1: Eurozone
Data strengthened in the Eurozone last week, not contributing to the € weakness… What did contribute to it was the lack of statement from Mario Draghi regarding a tapering of the current bond buying program. As a hangover from the prior week, speculation is mounting that the ECB will likely extend their buying program by six to nine months. It is currently slated to end in March, 2017.

Battle 2: Japan
With the mounting strength in the US $ the ¥ has managed to slip. For much of the spring the ¥ strengthened as a safe-haven. Recent weakness is welcomed for exports and international profit margins.

Battle 3: China
Last year China purposefully devalued their currency to increase competitiveness internationally. As of late the Ұ has been moving because of market activity. The increasing debt levels in China are creating fear over a mounting bubble in their economy. This could spell volatility in their currency and has caused many to move away from in in exchange for safer currencies. This is a welcomed devaluation to China as it induces their desired result of a more competitive stance.

Battle 4: Emerging Markets
This one is not so much a battle with the US $ as much the underpinning of its relationship with oil prices. As the $ increases oil prices slip and emerging economies that are dependent on oil revenues see their revenues shrink. Thus, the outlook and currency begin to look weak. To date, emerging markets have been resilient due to heavy inflows after years of anemic performance. Cheap prices and strong recent performance have kept flows up. The question will be if they can sustain growth in the face of mounting headwinds.

Conclusion
The truth will never be spoken by central bank lips, but the reality is a weaker currency helps a domestic company more competitive abroad, leading to more growth. It will never be spoken though, because it is an admission to a weaker current economy. It is much like a self-fulfilling prophecy, a central banks admission of that fact could cause companies to become guarded from making investments, something that could cause… well… the big R word…

It seems, however, that the world is kicking us when we are down. Okay, okay, I know I sound like a conspiracy theorist, but it seems with all that has been happening that these economies are taking advantage of current US strength to dig themselves out of a hole…

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