The U.S. is steaming ahead on vaccinations, with Biden claiming yesterday that all adults could be vaccinated by the end of May…
Some states are already reaching herd immunity, and others are easing restrictions in anticipation.
Texas reopened fully yesterday.
The U.S. economy has remained resilient and further stimulus measures will almost certainly be approved within the next couple of weeks.
The sheer size of the stimulus has led many to predict a tsunami of dollars hitting the system, plunging the dollar into oblivion…
But there’s a problem with this.
If everyone already knows (and has known for some time) that this would happen, how much is already in the price?
If we look around the world, where do people want to put their money?
The EU is lagging behind in recovery and vaccinations.
The UK is doing well on a relative basis, although the post-Covid, post-Brexit reality is yet to be fully defined.
Japan, well it’s Japan.
Then look to the U.S….
Where’s the best return?
Back to the dollar smile again…
We’re heading towards the top right…
It might seem strange to think of the Fed as hawkish while they continue with $120bn of monthly QE, but it’s all relative.
They are far more hawkish (or less dovish!) than most…
The Fed have been very happy to let bond yields rise as this demonstrates ‘confidence in the economic recovery’.
This past week, the RBA & ECB intervened as their yields rose.
U.S. markets look very attractive, dollar short positioning is at extremes, and the U.S. is about to reopen with a stimulus tailwind…
Hail to the king?
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