In today’s briefing:
- The US Dollar View and Its Implications for EM Currencies
- UK: High Prices Are Still Too Low
- CX Daily: Provincial Plans Hint at Where China’s Economy Is Going in 2022
The US Dollar View and Its Implications for EM Currencies
- Since the end of last year, the US dollar has persisted around its strongest level in two years on the back of rising US Treasury yields and risk aversion.
- I expect the dollar to remain strong at least until the US rates volatility drops meaningfully and the headwinds to US equities, including geopolitical and domestic growth concerns, fade.
- Once these risks pass, the dollar – which is expensive in valuation terms – should depreciate as the year progresses, creating a supportive environment for EM currencies.
UK: High Prices Are Still Too Low
- Inflation continued to exceed expectations at the start of 2022. The core impulse remained elevated, with our median, persistence-weighted and latent cyclical estimates all strengthening further.
- Consumer prices remain about 4% below their equilibrium. Disequilibrium has tended to drive surprises during the past decade, as it pulls prices in a way models often miss.
- This effect may continue to drive surprisingly strong headline and core inflation.
CX Daily: Provincial Plans Hint at Where China’s Economy Is Going in 2022
In Depth: Provincial plans hint at where China’s economy is going in 2022
Giant pandas join the list of China-U.S. flashpoints.
Xi orders Hong Kong government to make containing Covid its top priority
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