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King Dollar Isn’t Dead Yet

Jun 16, 2020 · 6 min read

By Kevin Kelly, CFA

TL;DR: The US dollar sits at the heart of nearly every major macro trend at the moment. The great in(de)flation debate, commodity prices, global growth, world exports & trade, the rebound in risk assets (both in the US and in emerging markets); the future of all these trades is, at least in part, tethered to the direction of the US dollar.

The US dollar’s recent pullback has largely been driven by a combination of extreme monetary & fiscal intervention, waning coronavirus concerns, and increased risk appetite (evident in the performance of risk assets and emerging market currencies). In the short-to-medium term, there are still several potential tailwinds for the greenback, and the risk for further upside should not be taken lightly. However, looking out longer term, there are significant secular and structural headwinds that point to a weaker USD, which provides its own set of consequences for global markets and asset prices.

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