Barclays believe markets are "overreacting...>

DOLLAR: Barclays believe markets are "overreacting to the subtle shift in recent

Fed rhetoric, particularly in the context of the USD. The Fed has little

tangible reason to pull back from its prospective tightening path now:

continuing fiscal stimulus, rising aggregate household earnings, solid household

balance sheets & savings rates, & still-accommodative financial conditions all

point to sustained above-trend US growth, while inflation and financial

stability risks lurk in the background. Recent notes of caution relate either to

concern that foreign growth may drag more than expected on an otherwise robust

US economy or uncertainty over the neutral level of Fed funds. The former merits

caution but is second order for US growth, and the latter is nothing new. In the

context of the USD, a dampening of the Fed's projected tightening path caused by

unexpectedly weaker non-US growth is unlikely to grant relief from USD strength,

particularly for EM FX. While a shallower Fed path may decrease the absolute

divergence of US interest rates from other economies, it likely would not on a

risk-adjusted basis, and the broader (unbounded) returns to capital differential

could widen. As an alternative safe haven, the JPY may be an exception"