Dollar may have eased back a bit after the ECB left QE unchanged last week

The dollar may have eased back a bit after the ECB left QE unchanged last week but it's still strong and exports are still languishing. The Fed's tradeweighted dollar index is up by 18% since mid-2014 and the market-based DXY is up by 21% on the same time frame even after last week's 2% drop. With the Fed preparing to raise rates this month, the question on everyone's mind is whether it's all priced in, or further volatility will ensue. Ironically, most say both: that everyone knows it's coming but markets will be choppy. It doesn't square but it doesn't have to. 

The dollar may be nearing the end of its rise but for now exports continue to head downward. They've fallen by 10% since October of 2014 and remain one of the key risks for the economy going forward. Goods exports alone account for about 10% of GDP so a 10% drop knocks a full point off of growth. The only reason it hasn't shown up in the statistics as vividly as this is because imports too are falling. It's another one of those statistical ironies that if exports and imports both drop by $100 - or $100bn - then GDP doesn't change. 

Plainly, though, if everyone's exports and imports are falling by $100bn then, globally, the prognosis isn't good. We're not there yet, but no one needs reminding that global growth is anything but strong. One might have wished for a better spring board from which the Fed could jump. Even if you think it's all priced, you might want to hold your breath.