Is it time to sell the dollar? – There are some encouraging signs that the global slowdown has bottomed out – financial markets are already celebrating the good news. However, we don’t think we’re seeing a repeat of 2016. Today’s pattern may be more “bend and stall” than 2016’s “bend and bounce.” If so, the reflation rally could soon stall. Our thoughts on that.
The macro perspective
Weak corporate investment in the US – so what? – Growth rates are holding up well worldwide. This also goes for the US, but corporate investment remains the problem child there. Weak investment by companies is often followed by a decline in other sectors of the economy but this time we can still hope that this pattern will not apply. Our assessment.
FX market talk
Signals from the trade-weighted dollar – The US dollar remains highly valued relative to most currencies that we track. When we look at the dollar relative to the currencies of its major trading partners, we find that the greenback is around 15 percent overvalued by this measure. Data going back to the early 1970s suggests that it is unusual for the dollar to stay so overvalued for as long as it has. Our observations on this.