⚡Will the Dollar's Surge Be Short-Lived?
Macro Mornings // #USDTrends #GlobalEconomy #MarketOutlook
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USD and Gold in a Shifting Market
Dollar Surge vs. Gold Decline: The USD gained 5.9%, reaching 106.7 on the DXY Index post-election, while gold fell from its year-long rally, mirroring expectations of tariff-driven growth and restrained Fed rate cuts.
Past and Future Trends: Similar dollar rallies have reversed within six months; current medium-term outlooks suggest that reduced global USD demand, stemming from lower imports, could weaken the currency.
Gold’s Strategic Role: With central banks diversifying reserves, gold prices may return to highs of over $2,000 per ounce, especially if geopolitical tensions persist.
Regional Growth Amid Global Headwinds
Singapore and Malaysia Lead: Singapore’s Q3 GDP growth reached 4.5% YoY, an upgrade from earlier projections, while Malaysia’s export growth rebounded to 2.0% YoY in October, reversing September's contraction.
Japan’s Wage Push: Labor unions in Japan are targeting 5% wage hikes for 2025, potentially lifting average wage growth to 2%, supporting domestic consumption amidst declining exports.
Inflation Stability: Malaysia’s headline inflation remains modest at 1.8% YoY, and Singapore’s CPI increased to 2.3% YoY, reflecting resilience despite global volatility.
Trade, Policy, and Credit Divergences
Trump Trade Peaks: The USD surged as expectations of 2.5% GDP growth in Q4 2024 and tax cuts boosted confidence, but market corrections are anticipated as skepticism rises over fiscal promises.
Fed’s Measured Approach: Interest rate projections suggest the Fed will reach a terminal rate of 4% by 2025, slower than past easing cycles, while global central banks adopt more aggressive cuts.
Credit Markets Split: US corporate bond issuance surpassed $500 billion in 2024, reflecting confidence despite higher rates, while China’s issuance remains subdued amid deleveraging policies.
Alessandro
Founder of Macro Mornings
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Disclosure
This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. This material has been prepared for informational purposes only. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.