I believe US dollar strength is likely to persist, largely driven by global growth, monetary policy and trade developments. However, there are a number of additional factors at play. Here is a checklist of dollar drivers and how I expect each factor to influence the currency.
With limited evidence of excess in the global financial system and mostly low interest rates around the world, we remain optimistic about global economic prospects. The expansion is poised to continue, led by growth in emerging economies.
Investor confidence in the global outlook for monetary policy, economic growth and inflation has kept volatility contained. Can it continue? We think the risk of a destabilizing policy error is low if central banks remain cognizant of global financial conditions.
A synchronized pickup in global economic activity has lifted the spirits of businesses, consumers and investors worldwide. Though many equity markets are near 52-week highs and credit spreads are near multi-year lows, we still believe the US credit cycle has time to advance in its later stage.