AUTOREFRESH 
Macro shift continues
Currencies are trading in risk averse fashion at month-end though the related markets are not showing a great deal of distress today. As noted yesterday, there seems to be more of a macro shift taking place these days rather than short-term headline chasing.
The macro view that the dollar was destined to reached Zimbabwe-like depths and that commodities would reach levels several times higher than today’s prices seems to have been dashed. Central banks continue to let lapse liquidity programs that programs that are no longer needed and fixed income markets have adjusted accordingly, With US yields 40-50 basis points higher than they were just two-months ago.
The dollar will not strengthen in a straight line, but the melt-down risk (hope?) that was priced in by the market is now priced out and technicals are such that long-dollar positions are preferred. If this results in less reserve adjustment, even at the margin, the dollar will benefit as Asian, Latin American and Middle Eastern central banks will be less inclined to blindly buy EUR to diversify reserves.
Today’s improved US data is just icing on a much bigger global asset shift, in my opinion. Forex trends can be very long-lived and powerful. Fading dollar strength is not recommended.
Add a comment