Currency Bulletin: Is the US Dollar Rally Nearing an End? Part Two
May 14, 2015
Written by Samson’s CIO, Jonathan Lewis and Iraj Kani, our Quantitative Strategist, this piece is a follow up to our March currency bulletin and discusses the recent dollar sell-off and why it may continue. Bulletin Highlights:
- In our March currency bulletin, we shared our view that the dollar would likely begin “a meaningful correction” as a consequence of the more dovish tone adopted by the Fed at their March 18th FOMC meeting. A series of events since then have heightened our conviction that the dollar sell-off may prove to be something more than a modest correction.
- Since our last bulletin, a string of weaker than expected economic numbers have been released that may give the Fed pause before tightening. Last week’s poor unemployment and trade reports, as well as this week’s producer price index and retail sales reports show a genuine trend of disappointing data.
- Both a stronger economy and higher inflation would benefit from a weaker dollar. Dollar strength would slow down exports and make imports cheaper – both of which would contribute to lower inflation, slower growth, and higher unemployment. The Fed has it made it clear they would like to see a stronger economy and higher inflation before they decide to raise rates. As a result we believe the dollar sell-off will likely continue.