US dollar - US Treasuries Divergence
The US dollar correlates positively to US Treasuries.
Market participants needs US dollar when buying US Treasuries as investments or as collateral.
Now we see a pretty sharp diverence and break of that correlation.
One would anticiapte a return to mean of this relationship.
My base-case is that the dollar will follow bonds and get bid up.
In short, my reasoning is as follows:
If liquidity continues to be tight, as low interest rates and central banks going crazy are signaling, the dollar will catch a bid as it's still the world reserve currency.
Regardless of my bias: when macro correlations diverge, its time to pay attention.
Market participants needs US dollar when buying US Treasuries as investments or as collateral.
Now we see a pretty sharp diverence and break of that correlation.
One would anticiapte a return to mean of this relationship.
My base-case is that the dollar will follow bonds and get bid up.
In short, my reasoning is as follows:
If liquidity continues to be tight, as low interest rates and central banks going crazy are signaling, the dollar will catch a bid as it's still the world reserve currency.
Regardless of my bias: when macro correlations diverge, its time to pay attention.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.