Cool Video: Bloomberg’s Daybreak – Dollar Correction

by
Marc Chandler
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I was on Bloomberg’s Daybreak: Americas today. The issue at hand was about the dollar’s losses since the start of the year. I suggest that the correction actually began a day or so after the Federal Reserve hiked rates in mid-December.  I noted that the correction was not just about the dollar but also interest rates.

I suggest that interest rates are still key. The US 10-year yield may have bottomed yesterday near 2.30%.  The US premium over Germany on 10-year money reached an extreme of almost 338 bp the day after the Fed hiked.  That was the largest premium since 1997.  The US two-year premium reached almost 2.00% at the end of last year,  as year-end scramble pushed the German two-year yield toward record lows.   That was the largest premium since 2000.  The premium that US over Germany narrowed in recent weeks, but is finding support.  I suspect that the dollar’s downside correction is over or nearly so.

About Marc Chandler

He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.

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