Greg Gibbs, Analyst at Amplifying Global FX Capital, suggests that the tepid recovery in the USD, in spite of higher US yields and improving economic outlook, raises the question – is the market becoming spooked by the worsening US fiscal outlook.
“Normally the market would not question the US Treasuries capacity to borrow. And it may be considered heretical to see the USD as other than a safe haven. However, this US fiscal expansion is especially risky, coming near the end of the business cycle, closer to a steepening demographic fiscal slope, and politics more partisan than ever. It is hard to imagine how Congress could cope with even a minor economic or financial crisis.”
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