Global View October 2015: Another Upward Lurch in the US Dollar?

by Michael J. Howell1. November 2015 18:20

Our models continue to favour the US dollar against the European currencies. Admittedly, we also see risks to the tempo of the US economy. However, a major factor driving the US dollar higher is the general shortage of US dollar funding. This makes this an unusual cycle. Similar factors were behind the 2008 surge in the US dollar as major investors sought to close leveraged loan positions. Looking ahead, we see Sterling as particularly vulnerable, given this deteriorating global financing backdrop and Britain’s large current account deficit.On top, a Chinese RMB devaluation also still looks likely to us. For those more wary of an upcoming US recession, hedging into gold makes sense. We have always argued gold is the obvious beneficiary of a new QE4 policy, and such a monetary inflation looks highly likely ..… sometime ahead.


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