Free Trial
JGB TECHS

(M2) Correction Extends

US STOCKS

Late Session Rebound

AUSSIE 10-YEAR TECHS

(M2) Corrective Cycle Remains In Play

AUSSIE 3-YEAR TECHS

(M2) Gains Still Considered Corrective

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access

Stronger USD Dampens Inflation Pressures (And Slows Growth)

GLOBAL

Following on from fresh 20-year highs for the DXY dollar index earlier today, an excerpt from our report on the US dollar (see here): financial and economic conditions are both directly and indirectly impacted by a stronger dollar - a few examples:

  • Transmitting to global activity: Higher USD debt servicing costs in local FX; central banks respond to weaker FX by tightening
  • Dampening inflation pressures: The implied drop in import prices would also be helpful from the Fed’s perspective. (The Chinese yuan’s renewed weakness vs USD marked the top in inflation breakevens – see chart). We may have seen some evidence of this from slowing goods price categories in April's CPI report.
  • Slowing US export growth
  • Weakens US corporate profitability: “Growth” stocks get nearly 50% of revenue from overseas; S&P overall about 40%; small-cap value 15-20%. So the stocks that have been driving the bull run for the last few years are already suffering most from tighter conditions.

Source: BBG, MNI


171 words

To read the full story

Why Subscribe to

MarketNews.com

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.

Following on from fresh 20-year highs for the DXY dollar index earlier today, an excerpt from our report on the US dollar (see here): financial and economic conditions are both directly and indirectly impacted by a stronger dollar - a few examples:

  • Transmitting to global activity: Higher USD debt servicing costs in local FX; central banks respond to weaker FX by tightening
  • Dampening inflation pressures: The implied drop in import prices would also be helpful from the Fed’s perspective. (The Chinese yuan’s renewed weakness vs USD marked the top in inflation breakevens – see chart). We may have seen some evidence of this from slowing goods price categories in April's CPI report.
  • Slowing US export growth
  • Weakens US corporate profitability: “Growth” stocks get nearly 50% of revenue from overseas; S&P overall about 40%; small-cap value 15-20%. So the stocks that have been driving the bull run for the last few years are already suffering most from tighter conditions.

Source: BBG, MNI