Will King Dollar Survive The Fed?

By Ashraf Laidi at ashraflaidi.com

Four weeks ago, the USD index hit 3-year highs, metals licked their wounds from the biggest decline in decades and the US growth story stood out in the headline. The Fed was considered the only major central bank capable of scaling down its quantitative easing, while the ECB mulled cutting interest rates to zero. The greenback was boosted by a powerful combination of fundamental and technical moving in tandem.

But all changed in June when the Fed reminded that any tapering of asset purchases would not necessarily tighten monetary policy as persistent growth in the Fed’s balance sheet would help maintain liquidity driven in the markets.

The Fed’s statement was not isolated. Signs of stabilization in the business surveys of the Eurozone and the UK PMIs as well as market scepticism with Japan PM Abe’s “policy arrows” conspired to rebalance the flows in currency markets.

— EconMatters

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