The USD should be rising 20% in YoY terms instead of falling 15% according to relative growth expectations. Unless the Biden-administration annihilates the USD, there are strong reasons to expect a sound USD comeback this year.
The price action in USD yields reminds us of the Swedish Eurovision winning song by Loreen: “We are going UP UP UP UP UP UP UP”. We have long warned of this move, why we are tempted to sing “Diggi-loo diggi-ley, life is goin’ my way, when I’m walkin’ in my golden shoes”.. Joking aside, The Fed almost surely thought that Wednesday’s message would lead to lower bond yields, but instead they ended up accelerating the long-end of the yield-curve (again). Central bankers simply don’t get market dynamics.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
