The Fed's pivot in December and the Treasury's willingness to run persistently large fiscal deficits will lead the dollar to resume its downtrend from 2022 highs.
Dollar strength seems to be in vogue again, but fiscal and monetary policy will conspire to make that trend unlikely to persist much longer.
Large fiscal deficits are a long-term negative for the currency as they are inflationary, and considering the US deficit is one of the largest in GDP terms, it poses greater downside risk to the dollar versus other currencies.
Shorter-term leading indicators are also dollar negative.
The real yield curve had been steepening last year, as longer-term real yields were rising more than shorter-term ones, due in part to the influence of rising term premium.
The dollar typically sees all its net gains in the first three months of the year versus an average decline of 0.9% through the remainder.
Net positioning in the dollar is flat, leaving speculators free to move with or against it.
https://www.zerohedge.com/markets/fed-and-treasury-ensure-dollar-downside-ahead
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