13 Tipping points in 2018
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The Fed is hiking rates, US rate differentials deutsche bank forex forecast widening and the dollar has become a G10 high-yielder. Current dynamics look very similar to the Fed cycle: The dollar's vulnerability in was a sharp deterioration in the current account: We deutsche bank forex forecast flows will matter more in too, but this time on the financial side. After benefiting from a big rise in portfolio inflows over the US basic balance has now peaked and inflows are slowing.
Combined US equity and fixed income valuations are at 20th century highs and it will be extremely difficult to find the marginal buyer of US assets in Tax cuts may allow the Fed to keep tightening but the impact on the dollar could deutsche bank forex forecast be more ambivalent if flows matter more. Add to this a potential shift in focus towards protectionist trade policy from the Trump administration in early and we note the best of the dollar policy narrative is behind us.
The European story looks far more positive. The dollar is no longer responding to Fed hikes because it already priced most of the exit around QE.
The market is not very responsive to Fed tightening because it does not believe it will get very far. Finally, in contrast to the US, the European flow story is far more positive.
European equity inflows picked up last year as the political and growth outlook improved. Fixed income flows may be next. ETF data from the top-4 European providers show that Europeans have amassed as many dollar assets as their holdings of domestic government bonds. Importantly these holdings are currency unhedged. Combined with a large current account surplus, it will be hard to fight positive European flows in Information on these pages contains deutsche bank forex forecast statements that involve risks and uncertainties.
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