What I Learned This Week

U.S. Dollar Outlook.

We have been consistently bearish on the dollar and bullish on the euro and the yen since early 2017. While the euro rallied 20.40% from the December 2016 bottom to the February 2018 top, the second quarter severely tested that position as the euro corrected significantly. The euro declined 7.76% during 1H-2018. This was caused by a variety of factors: the Italian election, dissension over migration threatening Merkel’s leadership, and the surprising decision by the ECB to maintain current interest rates well into 2019. Poland and Hungary added additional stresses. While we acknowledge the revival of populism and nationalism in the eurozone, we do not believe it will result in a breakup of…

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