TSLombard with more reasons to be long DXY.
The US economy is just too strong. The ECB and the BoE have made a valiant (some may say brazen) attempt to keep up with the Fed. The BoE is now giving up and the ECB will soon throw in the towel too, next week notwithstanding. The PBoC last year tried to get ahead of anticipated reopening inflation only to be presented with deflation (admittedly only including pork) and weakened growth differentials, leading to a swift reversal towards easing in recent months. The BoJ joined the battle against the dollar this year, as Japanese inflation and growth began to pick up and the currency started to require support amid a yawning yield differential. The Bank may soon need to take further steps to convince markets it is treading the path to normalisation.
Whether or not US recession arrives in the near future, the economy’s outperformance against Europe and China looks set to continue, and Japan has not sufficiently decoupled from world trade to remain immune.
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