DXY is priming to target the 2014 lows - I expect a further weakening move after the infrastructure bill is passed this week / next week and as the debt ceiling (largely a formality at this point) as the US further enters the Japanification territory of perpetual bond purchases by the Fed.
Either the Fed accepts its fate or it fights the markets and allows it to drop 80% by tapering and pulling support away. Not sure which direction they'll take but for now Powell is relying on "market signals" to continue accommodative support to the market with low interest rates and monthly bond purchases.
Eventually he will attempt a taper of bond purchases - the issue is that the market is so fragile that it would cause a pretty disruptive drop that would cause Powell to continue support - c. what Japan is embarking on and has been to some degree the last 30 years. The structural difference b/w Japan and the US is that population growth hasn't reached negative levels yet in the US, meaning there is on balance a higher probability that Powell will at least attempt the taper and raising rates sometime in 2022 but potentially delaying it to 2023 for rate hikes at a minimum.
Either way - DXY looks like it will test the 2014 lows over the next 6 months due to a number of weakening dollar fundamentals. Trade flows are now finding their way back to China due to Trump losing and this has dollar implications for at least the next couple quarters until macro elements of the Fed take over again.
Either the Fed accepts its fate or it fights the markets and allows it to drop 80% by tapering and pulling support away. Not sure which direction they'll take but for now Powell is relying on "market signals" to continue accommodative support to the market with low interest rates and monthly bond purchases.
Eventually he will attempt a taper of bond purchases - the issue is that the market is so fragile that it would cause a pretty disruptive drop that would cause Powell to continue support - c. what Japan is embarking on and has been to some degree the last 30 years. The structural difference b/w Japan and the US is that population growth hasn't reached negative levels yet in the US, meaning there is on balance a higher probability that Powell will at least attempt the taper and raising rates sometime in 2022 but potentially delaying it to 2023 for rate hikes at a minimum.
Either way - DXY looks like it will test the 2014 lows over the next 6 months due to a number of weakening dollar fundamentals. Trade flows are now finding their way back to China due to Trump losing and this has dollar implications for at least the next couple quarters until macro elements of the Fed take over again.