• The dollar has not followed risk trends in some time, so record high equities are not an immediate threat
• Interest rate forecasts are key to the greenback's recent tumble and are the most likely driver ahead
• Tempering expectations of a near-term FOMC hike, however, does not equate to a dovish outlook
The dollar is in the middle of its biggest tumble in six months. Yet, the drive behind this move has imminent limitations which are likely to delay or even prevent a major break like EURUSD's ambitions on 1.4000. The currency's current tumble is not rooted in risk - the theme itself has lacked for consistent influence for some time. Instead, the bearish hit comes on behalf of interest rate expectations which have eased back as ambitious hawks recognize the slow pace the Fed is committed to in its transition from QE to Taper to the first rate hike. Yet, while that progression may be slowing, it is still being made. That is a reality that will translate into a correction rather than a trend for the benchmark dollar. We discuss the dollar and its bearings exclusively in today's Strategy Video.
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