Dollar Strength Almost Kick-Started Deflation In Other Asset Classes: BAML

When the U.S. dollar began its multi-month bull run in July 2014, it almost kick-started a wealth of “deflationary” price action across other asset classes, such as commodities and EM currencies, believe analysts at BAML. Barnaby Martin and team point out in their Feb. 12 research note titled “The month that changed the world” that now negative rates are starting to look the norm rather than the exception for central banks, and it is all because of Dollar Strength.

Dollar Strength & July 2014: The month that changed the world

Martin and colleagues point out that when U.S. economic data began to improve in July 2014, the U.S. dollar’s strength was arguably behind many of the narratives and bearish drivers of today’s market. They...