According to Mark McCormick, North American head of FX strategy at TD Securities, the Fed has to some degree noted the froth in a handful of US risk assets and by implication the loss of fiscal support and gradual monetary tightening are enough to change the outcome.
Key Quotes
“It is clear that US risks asset should continue to correct but what it is not clear is whether this stokes a real economy recession next year. The price action reflects the unwind of easy money and years of financing engineering, though the Fed’s not sure how soon (or much) this spills into the real economy. What’s clear to us, however, is that this backdrop reinforces the steady climb down in the broad USD.”
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