Just some bullet points worth noting. Wish I could say that all these were original ideas, rather they are accumulated thoughts and interpretations from the research reports I sort through each day.
Let's take a look at the US dollar (Dollar Index, DXC) for a moment from an interest rate perspective and see how the implications are rather dollar bearish in the months, perhaps years ahead.
- Historically, when US growth falls below 2.0% the economy has had a tendency to slide into recession. Given that US growth was already sub-2% when the credit/liquidity crisis hit, it is easy to see why recession fears are growing along with aggressive rate cut expectations
- US short-term money market rates are expected to fall not just below Euro rates, but also G7 rates - shifting the US dollar from a yielding currency to a funding currency.
- This scenario has been associated with major turning points in EUR/USD. Witness the 2004 peak in EUR/USD at 1.3670 when the US dollar became a yielding currency.
- The US yield curve in general could also add to the dollars woes although at present the curve still trades above Euro curve with 10-year yield differentials still favoring the US
Let's take a look at the US dollar (Dollar Index, DXC) for a moment from an interest rate perspective and see how the implications are rather dollar bearish in the months, perhaps years ahead.
- Historically, when US growth falls below 2.0% the economy has had a tendency to slide into recession. Given that US growth was already sub-2% when the credit/liquidity crisis hit, it is easy to see why recession fears are growing along with aggressive rate cut expectations
- US short-term money market rates are expected to fall not just below Euro rates, but also G7 rates - shifting the US dollar from a yielding currency to a funding currency.
- This scenario has been associated with major turning points in EUR/USD. Witness the 2004 peak in EUR/USD at 1.3670 when the US dollar became a yielding currency.
- The US yield curve in general could also add to the dollars woes although at present the curve still trades above Euro curve with 10-year yield differentials still favoring the US