Loading ...By Garfield Reynolds, macro commentators and a Markets Live blogger for Bloomberg.
Dollar’s Surprise-Driven Rally Could Consume Itself: Macro View
The astonishing thing about the recent rally in the greenback is how surprised so many have been by its strength at a time when the U.S. economy has been an oasis of resilience amid a desert of dismal global data. But the U.S. currency could soon face headwinds as expectations elsewhere shift and its very strength could spark a reversal with many drivers for dollar weakness still very much in play.
The dollar’s rally makes a world of sense if you look at relative economic surprise data. While U.S. figures have continued to exceed expectations since the end of February, those for Europe and Japan have crashed to multi-year lows.
The euro and the yen account for more than half of all FX transactions, so it’s no wonder the greenback has been so perky of late, rising about 1 percent against the former this month and over 2 percent against the latter. In addition, both heavyweights tend to drag along major satellite currencies with them — the British pound, Swiss franc and Scandies for the euro, a bag of Asian currencies led by the Korean won for the yen.