0
65
Research Team at BBH, suggests that the divergence of monetary policy
remains very much in place, and it is not fully priced in, and they
wonder if it really can be discounted.
Key Quotes
“We see the price action as an arguably long-overdue correction to a move that began in mid-October. The extent of market position had left it vulnerable to a buy (dollar) rumor, sell the fact even if the ECB had not disappointed.”
“Until we are closer to the peak in the monetary divergence, the main dollar driver, it is difficult to call an end to the third significant greenback rally since the end of Bretton Woods. For medium and long-term investors who broadly agree with this assessment, this pullback in the dollar is the kind of opportunity that has been awaited and anticipated. That said, a dollar decline is the pain trade. But given the sharp rally in US stocks ahead of the weekend, recouping everything it lost in the previous day's debacle, and then some, it is the holiday season and investors prefer pleasure to pain.”
“This can make for choppy conditions and prevent a new trend from emerging immediately. The dollar bulls have been scared (emotional) and scarred (material losses), and will be reluctant to jump back in immediately. The bears may be more opportunistic than true-believers, and want to squeeze more bulls. However, they do not want to overstay their welcome, with a Fed hike looming, and the low-hanging fruit--the weak dollar longs--have already been picked.”
Key Quotes
“We see the price action as an arguably long-overdue correction to a move that began in mid-October. The extent of market position had left it vulnerable to a buy (dollar) rumor, sell the fact even if the ECB had not disappointed.”
“Until we are closer to the peak in the monetary divergence, the main dollar driver, it is difficult to call an end to the third significant greenback rally since the end of Bretton Woods. For medium and long-term investors who broadly agree with this assessment, this pullback in the dollar is the kind of opportunity that has been awaited and anticipated. That said, a dollar decline is the pain trade. But given the sharp rally in US stocks ahead of the weekend, recouping everything it lost in the previous day's debacle, and then some, it is the holiday season and investors prefer pleasure to pain.”
“This can make for choppy conditions and prevent a new trend from emerging immediately. The dollar bulls have been scared (emotional) and scarred (material losses), and will be reluctant to jump back in immediately. The bears may be more opportunistic than true-believers, and want to squeeze more bulls. However, they do not want to overstay their welcome, with a Fed hike looming, and the low-hanging fruit--the weak dollar longs--have already been picked.”
