Thursday, September 25, 2014

US dollar strength

Diverging monetary policies have fueled US dollar strength this summer, but Chapdelaine Foreign Exchange's Doug Borthwick thinks a pullback is coming. The greenback has ridden the wave of QE tapering and prospect of a mid-2015 rate hike. But further strength will need to be derived from how the Fed manages its balance sheet, and here, Borthwick thinks any wind down will be a drawn out process. Meanwhile, any ECB effort to boost its balance sheet is limited within its ABS-buying program. "This may be the point where the market digests recent comments and pulls back the excitement as recent rhetoric shows the foundation to the trade is not exactly built on stone."