USD: The battle of the cycles - AmpGFX

Greg Gibbs, Analyst at Amplifying Global FX Capital Pty Ltd, suggests that it does appear that at various times over the last two years that the market has tried to look over the edge of the US rate cycle, resulting in periods of USD weakness. 

Key Quotes

“The USD peaked at the end of 2016. The USD has also been weaker at times because investors were seeing more synchronised global growth encouraging investment in emerging markets and Europe even as US rates were still rising.”

“However, for the most part, this year, the USD has strengthened as rising US rates have contributed to more volatile global asset markets. Higher USD borrowing costs have triggered financial market upheaval in several emerging markets with weak fiscal and or current account balances, reliance on USD debt finance, and troubled political environments.”

“Chinese economic growth has cooled as its efforts to control shadow-bank finance and excesses in corporate debt have caused some financial stress.”

“US trade policy and increasing use of sanctions against Iran, Russia and Turkey have further undermined global growth confidence, while the US economy has powered up on massive fiscal stimulus via tax cuts and higher government spending.”

“Global growth synchronisation that was apparent through last year has reverted, at least partially, to clear US growth leadership.”