According to Mark McCormick, North American Head of FX Strategy at TD Securities, the melting of risk appetite generated little follow-through, offering risk appetite a pop and their global macro stress gauge has reached new highs but this is not universally positive for the USD.
Key Quotes
“A US-based carry trade has benefited the USD, reflecting the mix of relative equity performance and well-contained volatility in the face of QT, the end of easy money and global trade wars.”
“We don’t think the latest risk meltdown represents a shock to global growth but rather part of the two-way risks that accompany QT. Still, the important point is that US FCIare tightening faster than the ROW while the ratio of US to global equities has peaked. This setup isn’t universally bearish the USD, though it favors reserve FX against the $ bloc and offers value in some risk assets.”
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