Three complications underpinning dollar strength – TDS

By FXStreet FXStreet (Guatemala) – Richard Kelly, head of Global strategy and analyst at TD Securities explained that there are three complications that point to a risk that USD strength might linger.

Key Quotes:

“The Fed is likely to get further ahead of global central banks than in previous cycles, so rate differentials might be more USD-positive than usual.”

“Global CPI will move higher, but this reflation will still leave inflation running at some of its lowest, nonrecessionary levels.”

“The need for EM credit adjustment suggests that risk appetite may be less than usual.”

“If the dollar does not turn lower, and especially if the dollar strengthens materially, that would pose a significant complication to the 2016 outlook. While most G10 policymakers might think they would prefer a strong dollar trend that gives their own currencies relief, significant dollar strength would still weigh on EMs, and delay the ability of EM credit adjustment to lessen and risk to rally.”
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Source:: FX Street