Gas Crashes Below $7 as the Dollar Reaches New High – Trustnodes

The price of natural gas is now down more than 30% from its peak of $10 in August to $6.68 as of writing, falling another 2% this Monday.

A tour by the German chancellor Olaf Scholz of the Gulf countries, where on-going negotiations between Germany and Qatar have kept going for months, may have been one small contributor to this price fall.

Scholz however came out only with a small deal, and with UAE, to the point Bloomberg sneered “Germany Secures Just One Tanker.”

Negotiations with Qatar thus keep going on, now for months, suggesting they might be intractable.

The dollar therefore is probably a better explainer for this recent price fall, especially as US oil also fell bellow $80, though it is up 1% today.

The dollar strength index (DXY) has reached a new high above 113, unleashing huge volatility in foreign exchange markets.

The euro is now worth less than the dollar, and the pound almost reached parity. British media blames the latter on the biggest tax cut in half a century, yet GBP had reached 40 year lows before the new prime minister, Liz Truss, took over.

Now, however, what the pound does is a political matter as Britain goes to battle against the near two decades long stagnation.

Kwasi Kwarteng, the new British chancellor, is suddenly responsible for everything markets do, even though markets have moved in the same trend they have been.

Facts are often not too relevant in politics, and one fact no one mentions is that Britain, as well as US, though not quite technically bankrupt and certainly not practically bankrupt, are growing at a slower pace than their debt.

That’s unsustainable, and business knows it very well, which is why they’re backing Trussteng.

As they come under pressure, the duo has to decide whether to blink. If they do, the market will be ferocious if they try to return to their plan again.

Erdogan is probably not the best example to provide, but when he moved to lower interest rates the first time, markets sort of just accepted it.

Under intense pressure however, especially from left-leaning Bloomberg, Erdogan blinked, and gave up.

Yet the data from that pre-blink period seemed to support his argument, so he returned to lowering interest rates.

The market this time responded ferociously, crashing the Turkish Lira. Their aim, presumably, to make him blink again, but he didn’t blink the second time.

That lira dive spiked inflation in a semi-dollarized economy, but the lira has stabilized, inflation should too, and all the while the Turkish economy is growing at pre-2019 China rates, while locals haven’t quite felt the headline inflation in their day to day, certainly not at calamity levels.

No one can say what would have happened if Erdogan did not blink, whether the lira would have reached the same level anyway, but if Trussteng blinks they need to consider a return to their plan may well be a lot more costly.

The dice has been cast, let the chips fall where they may, at least for some time with the market potentially rewarding the appearance of strength and determination, while any dithering will probably be punished.

The big question is of course whether the tax cut and investment in infrastructure, innovation etc, will lead to good growth.

We’ll have plenty of A/B tests, UK’s neighbors, and markets in the meantime may well be on suspension, waiting to see the results.

The Bank of England however wants to crash the economy. Its chair, Andrew Bailey, has said as much. The government wants to boost it.

Some say we’re on a shift, from fiscal tightening/monetary loosening, to monetary tightening/fiscal loosening. The Bank of England should have gone faster, they thus argue, to keep confidence in both the pound and bonds.

Yet, government borrowing is becoming more expensive as bond yields are up across the board, with markets mostly waiting for Fed to pause at some point if others are to catch up.

But bitcoin is suddenly somewhat stable through all this. Nasdaq is even green today. FTSE barely moved, -0.05%.

A cheap pound means a lot more exports, even if US products are more expensive. The pound fell a bit against the euro however, with volatility so seemingly moving from stocks to fiat money.

Who will fall, is the question, as the mountain of debt now becomes a lot more expensive.

With their pitch of growth getting UK out of this, Britain at least has room for hope. US and Europe should be fine too, but some of the economies that benefited hugely from the monetary policies of the past circa two decades, may be in trouble as we witness what may be a re-shifting of the center to Europe and US.