US Dollar Outlook
2021 Outlook: The Great Monetary Schism – A Weaker US Dollar, A Stable ‘Asian Dollar’ and a Rising Euro? A consensus is emerging that the US dollar will weaken in 2021. Our work agrees, but for very different reasons. Capital flows frequently drive currencies and the starting point of a large US$5½ trillion bulge from recent cross-border inflows is a shadow that looms large over the US unit. On top, we suspect that Fed policy will have to take on even more of the policy burden in 2021. Dollar weakness is likely to be most obvious against the Euro, largely because Eurozone policy lacks the flexibility to hold its currency down. This will be amplified by the newfound stability of Asian units, which suggests that exchange rate targeting is a central part of regional policy. See our latest published research, Global View - 2021 Outlook: The Great Monetary Schism – A Weaker US Dollar, A Stable ‘Asian Dollar’ and a Rising Euro? – November 2020