Burnt offering

The long US dollar trade has been a rather testing one so far this year. Weaker US growth and a slowdown in the pace of global expansion have forced markets to reprice Fed rate expectations. That’s undermined our monetary policy divergence thesis. But we expect US growth to rebound over the remainder of the year, while inflationary pressures should also heat up. That should be enough to drag out two hikes from the Fed. At the same time, the ECB and BoJ should continue to ease. We remain long the US dollar versus the euro, yen and emerging market (EM) currencies, specifically in Asia.

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