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No stopping the all-conquering US dollar

The world’s premier reserve currency continues to astound and delight dollar bulls.

Volatility measures are elevated and rising as bond yields go through the roof.

The strong greenback marches ever higher and is making new multi-decade highs as we write.

No stopping the all-conquering US dollar

It is truly a historic move we are witnessing, over the last few weeks especially. Major currencies like GBP and NZD are about 9% down against the dollar, in a single month.

The meltdown/melt-up doesn’t look like it is going to change any time soon.

A slew of hawkish Fed speakers hit the wires yesterday. A new page in the energy war in Europe looks to be opening on news that Nord Stream was a potential act of sabotage. Recent US domestic data surprised to the upside yesterday.

Many veteran market watchers are now talking about the 1980s (that decade again!) and what the US authorities did to tame inflation as the dollar soared. Paul Volcker was the man at the helm of the US Federal Reserves.

Like the current Fed of today, he was prepared to accept recession as collateral damage and eventually took rates to 15%.

While no one in the markets is projecting the Fed funds policy rate is going into double figures anytime soon, there is speculation that we could see a co-ordinated response to the strong dollar.

 

The pound looks precarious after it failed to hold above 1.08 yesterday.

The BoE’s chief economist warned yesterday that a significant monetary policy response was needed to counter fiscal easing. But he played down the chance of an intermeeting response.

He also scored something of an own goal by saying the bank will continue with gilt sales. A stop to this was mooted as a possible move to slow the sterling selloff.

We get the bank’s Cunliffe and Dhingra speaking today but a push near to the record lows in GBP/USD looks tempting for dollar bulls.

Push near to the record lows in GBP/USD looks tempting for dollar bulls.

 

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