Benign Neglect

The US dollar has come under selling pressure over the last fortnight trading down against other major world currencies between 2-3%.

The critical issue is not one of direction but speed. If momentum gathers against the dollar it could force US interest rates up inducing a significant monetary contraction. We would then enter a stagflationary period of higher interest rates and lower growth. This could come as a short sharp shock to the global economy.

It is worth following the pace of the US dollar's devaluation over the next months.