Even before the horrendous German figures this morning the market was shedding currencies and commodities on the notion that global growth will continue to slow in the months ahead. AUD and Kiwi led the way lower while oil and gold have since followed.
Chinese stimulus is still being debated with trial balloons being floated daily. Many see China as the linchpin of a revival in global markets as many fear a post-Olympic slump. Others expect a rebound a business-as-usual returns to the Beijing region as factories belch back to life after being shuttered to improve air quality ahead of the Games.
Against this backdrop, the buck has proven to be a beneficiary. During the emerging markets bubble, the dollar was shunned as current account surpluses swelled abroad. Slower global growth will trim those surpluses and reduce downward pressure on the buck.
