A few quick points from MS on why they are not expecting the US dollar to remain universally strong
Core DM wage rises suggest that it will not only be the Fed leaning towards hawkishness.
- Last Friday, Bloomberg reported that the ECB doves were urging for President Draghi to strike a more cautious tone on the economy in last week's policy message but were ultimately won over.
- The BoJ seems to be replacing its inflation with a growth target as it has become increasingly concerned with its easy monetary policy leading to unwanted distortions within its capital markets and economy.
The message is clear: DM liquidity has turned less ample, not boding well for capital-importing countries. Hence, EM selling pressure seems warranted. However, in light of rising wage price pressures, markets have stayed too sanguine in respect of European central banks
