Article: Negative Interest Rate adopted in Sweden - Cumberland Advisors - Market Commentary

This article, http://www.cumber.com/commentary.aspx?file=070909.asp&n=l_mc (7/9/09) explains the Swedish bank's action. Tony Caldaro had mentioned it a couple of weeks ago but this was the first other mention I've seen. The concept is one that the deflationists have suggested, so it is interesting to see this occurrence. If deflation takes more serious hold, then we may see more examples (and will also be noticing lower commodities and equities prices too).

This article suggests that the action may, whether directly or indirectly, cause more strengthening in the dollar. Certainly the dollar is on our radar screen! It has not rallied much, but might be coming out of a cyclic low without having made a new low in the dollar index ($USD, measured against a basket of currencies, and looking very inverse to the euro).

This is one of the reasons why we continue to observe the currencies. Even if you do not trade currencies, you can consider them as if they are another technical indicator suggesting the path of equities. And if the dollar strengthens from here - and interest rates lower, and even go negative - that does not look good for equities markets.