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Cool Video: Bloomberg Television–Dollar Outlook

 

I had the privilege to join Alix Steel, the Bloomberg anchor, and Laird Landmann from TCW on the set earlier today. Here is the link to the 2.5-minute clip.

The issue is the dollar’s outlook. The greenback had looked to be on the verge of breaking out higher before the US President expressed disapproval with the Fed rate hikes and, then the following day, aggressively accused the EU and China of manipulating their currencies.

Laird and I were largely in agreement. The G20 statement recognized many of the risks to the world economy and the US. He anticipates a turn in the data. I have been tracking a growing number of late-cycle indicators (and note that interest rate sensitive sector like housing is showing some strain, perhaps as interest rates climb, existing home sales fell each month in Q2, as did building permits).

We noted Mnuchin’s attempt to walk back what had seemed to many to be Trump’s jawboning of the Fed and trying to talk the dollar down. The market was never persuaded that Trump’s displeasure about rising interest rates would impact Fed policy. To the extent that the Fed funds futures strip has changed, it implies higher rather than lower rates. On the other hand, the dollar is lower. I suspect the short-term momentum players got caught leading the wrong way, and the net result is to reinforce range-trading. Still, going forward, market participants have to recognize the risk of more of these type comments, which may mean little in the greater scheme of things but could inject extra short-term volatility.

 

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Marc Chandler
He is Global Head of Currency Strategy of Brown Brothers Harriman (BBH). He has been covering the global capital markets in one fashion or another for 25 years, working at economic consulting firms and global investment banks. He regularly appears on CNBC and has spoken for the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. BBH provides specialist services and innovative solutions to many Swiss asset managers that include a global custody network of close to 100 markets, accounting, administration, securities lending, foreign exchange, cash management and brokerage services. Feel free to contact the Zurich office of BBH
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