The firm says that the greenback may still struggle so long as the market believes the Fed will lower rates to counter a virus-driven slowdown
The firm's strategist, Valentin Marinov, argues that "the dollar's under-performance could be attributed to the latest build up of Fed rate cut expectations".
And that it "reflects concerns about the virus spreading to the US as well as fears that the economic outlook may deteriorate from here".
He also notes "talk about fiscal stimulus in the Eurozone and aggressive stimulus measures discussed in Japan seem to limit the scope for further easing by both the ECB and the BOJ".
I wouldn't argue with any of the above points but it is important to also think about what may happen next. Monetary policy is but a temporary solution to combat the virus outbreak but the market can't solely rely on the Fed to drown out the potential slowdown.
The Fed could cut rates to 0% and still it will do little to change the situation should the virus become a global pandemic and we see lockdowns globally.
Meanwhile, talk about Germany loosening the purse strings a little may be encouraging but it feels like a case of maybe being a little too late to matter. But we'll see. Perhaps any little bit may help considering the potentially dire circumstances.
