What the Fed’s policy shift means for the dollar: The minutes of the latest FOMC meeting confirm that the Fed is turning dovish. So far, this shift has not had a big impact on the general direction of the USD. But that might change if the Fed adopts a new approach to inflation targeting. Our thoughts about the inflation expectations and the USD trend.
The macro perspective
Strong exports lift the Swiss economy: Even though global growth has slowed, risk of recession remains low. Switzerland’s strong foreign trade performance defied the flagging worldwide trend. But domestically the Swiss economy is showing some signs of weakness. Nonetheless, low interest rates and a remarkably strong labor market continue to provide support. Our comment about the impact for Switzerland of the global economy.
FX market talk
The strong and the weak in emerging market FX: Emerging market currencies generally remain cheap relative to the US dollar. Despite some recent strengthening, our valuation measures indicate further appreciation potential for EM currencies against the US dollar, but less so against the euro and the Swiss franc. But there are big differences in the fundamentals of the various EM currencies. Our assessment of the emerging market currencies.