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Chart of the Day: Trade-weighted USD

We looked at the USDX yesterday as the Chart of the Day. Price continues to test the ceiling of 98.05. However, the big new development has been a new all-time high printed in the trade-weighted USD. This is significant, and won’t have gone unnoticed by both US President Donald Trump and the Federal Reserve. It’s weighed on emerging-market (EM) FX, with big declines seen in the BRL, MXN and TRY.

Aug 20 Chart of the Day: Trade-weighted USD

Outside of EM FX, markets seem to be taking this USD move quite well. But should we see weakness in the global data flow re-establish itself, then expect volatility to come back into market moves. The combination of weak economic data, a Fed that still sees the US economy mid-economic cycle, and a strong USD is a toxic mix and a recipe for far higher implied volatility and risk aversion.

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