Salient to Investors:

Robin Brooks at Goldman Sachs said:

  • The dollar’s rise is small in historical and economic terms as many traders wait/hope for a pull-back which won’t come.
  • Euro-dollar levels are not remotely pricing in the kind of balance sheet expansion that Draghi talked about in September, so future ECB press conferences will trigger more euro-dollar downside – to $1.25 in 6 months and parity by the end of 2017.
  • Factors ranging from monetary-policy divergence to inflation trends indicate the dollar’s rally against its major peers during the past 4 months has room to continue.
  • Recent dollar strength has been an unusual confluence of idiosyncratic trends, and as Fed forward guidance fades, we will see real dollar strength.

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