For the dollar to fall sustainably, the Fed will have to cut more aggressively than policymakers are likely to countenance.
That's the message from a new Goldman note out Thursday morning, which cites the greenback's safe-haven appeal and the rate differentials pillar (what Donald Trump was complaining about on Wednesday in his tweet about "the spread") in explaining why the dollar likely won't roll over absent a determined Fed.
"The global risk backdrop has weakened over the past couple of weeks from an already-fragile place", the bank wrote, before asking "what might it take to see the broad Dollar weaken in an arguably favorable environment for flight-to-quality flows [given] rising policy uncertainty, slowing global growth, and our expectations for Fed easing already roughly in line with market pricing through year-end"?
The "problem" - if that's what you want to call it - is that the dollar tends to move inversely to global growth, appreciating when growth falters, and depreciating when it perks up.
This dynamic is exacerbated when the US economy is outperforming the rest of the world, as it is right now. That is at the center of what we've variously described as Preside
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