2016 Outlook - Part II Currencies and the Path of the Dollar

Click here to view the report

“I don't pretend we have all the answers. But the questions are certainly worth thinking about.”

                  Arthur C. Clarke

Questions abound; certainty more scarce than usual when it comes to the path of the dollar this year.  I am starting the year with three seemingly plausible dollar scenarios in mind; one is bearish and two are bullish…

  1. Surges to new highs on growth and yield, i.e. foreign direct investment flow for capital gains from relative growth in the US and hot money flow on rising yield differential, or
  2. The top is in after a 9.5% gain in US dollar index during 2015 predicated on a move by the US Fed; but now the good news is in the price on the expectation the US economy will muddle-through the year as the yield differential fades as the Fed capitulates on its stated four rate hikes:
  3. There is a major sell-off in global stocks markets; junk bond defaults and emerging market contagion create a whopping risk bid for the US dollar driving it sharply higher against the rest of the pack, with the exception maybe of the Japanese yen.

I suspect we could see all three scenarios, to a great or lesser degree, in play at times during 2016.  If so, I suspect an ebb and flow...click here to view the report


12 January 2016

Jack Crooks

Black Swan Capital