Re-entering Dollar shorts

There have been long, multi-year cycles in the US dollar over the last 50 years, often linked to divergent monetary policies or structural re-ratings of asset prices relative to major economies. The post Covid-19 downturn and new growth cycle have temporarily disrupted what we believe is still a long-term USD bear trend. As part of this cyclical view, we re-iterate a bearish USD call, predicated on a further steepening of the US yield curve as well as a resumption of growth outperformance outside the US.What you will learn:

• We believe now is the time complement our strategic underweight in the US Dollar by initiating a tactical short DXY position, expecting the greenback to weaken over the next few quarters as we head into 2022.
• Our argument hinges around our core view of yield curve re-steepening and a rebound in global (ex-US) growth, driven by Europe and China, as we move decisively from the early to mid- phase in the current growth cycle.
• Today is most similar to the 2003/4 period, where the dollar initially appreciated in anticipation of the first rate hike, but subsequently fell over an extended period even as the Fed hiked rates in the second half of 2004.