Inflation Will Support USD

| Multi Asset

According to a number of recent academic research papers, the currencies of countries with the most dynamic macro cycles tend to outperform the currencies of less dynamic countries. Differentials in our Nowcasters largely corroborate this conclusion: the currencies that appreciate the most are those with the highest Nowcaster levels.

Since February, our indicators have clearly shown a strong convergence of the 83% of world GDP that we follow through our indicators. However, on the inflation front, our Nowcaster indicates that the US is the economy with the highest inflation pressures. Our US indicator is ahead of the one for the Eurozone, Switzerland, Great Britain, the Nordic countries, Japan and Australia. It is even ahead of several emerging countries (notably Russia and Mexico) where food inflation is running hot.

Given the magnitude of the fiscal and monetary stimulus that the US will receive over the next few months and the faster relative pace of its vaccination campaign, our global Nowcaster spreads justify an overweight to the US dollar.


Inflation Will Support USD
Source: Bloomberg, Unigestion. Data as at 19 March 2021.

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