The Calm Before the Dollar Rally

Published on
March 4th, 2019
24 minutes

The Calm Before the Dollar Rally

The Expert View ·
Featuring Joseph Trevisani

Published on: March 4th, 2019 • Duration: 24 minutes

Joseph Trevisani, Senior Analyst at FXStreet, breaks down the drivers of the current stasis in the global currency markets — and why he believes that period is about to end. Trevisani looks ahead to explore the structural changes he sees ahead and their potential impact for the dollar, the renminbi, the euro, the Japanese yen, and the complex of commodity currencies. Filmed on February 26, 2019 in New York.


  • bm
    brian m.
    11 March 2019 @ 20:42
    Long term I agree that Australia will be reasonably good (Good demographics and good resources). But in the short term they will suffer from problems in China and their household debt.
  • LC
    Lloyd C.
    11 March 2019 @ 09:44
    Not likely China will be able to reach a trade deal with the US because they can't afford to open their markets AND maintain the RMB peg. Given they can't float their currency either, they're stuck. I think they'll try to wait out Trump's presidency.
  • DP
    David P.
    4 March 2019 @ 23:34
    The Fed's rate decisions at this point are nearly 100% based on level of 10 year and S&P 500. The employment data and wage data are utterly unimportant to them at this point. They are asset targeting and, obviously, in the equity markets daily. Within 5 years we will be full Japan, with Fed actively and openly buying the S&P...
    • DR
      David R.
      4 March 2019 @ 23:44
      Yeahbut that'll fail and backfire miserably. US runs massive twin deficits; Japan runs surplus. Japan has a large, well-off middle class; US has a shrinking poorer middle class. Japan's decline happened while China and US were strong economically so helped pull Japan along; in contrast the world is now in a globally synchronized downturn. Japan is self-funding and a large creditor nation to the world; the US is by far the worst debtor nation in human history and technically bankrupt - with $22T of immediate debt and up to $200T of "off balance sheet" but REAL debt to its own people. Bottom line is, US and China and western Europe are in much different situation (worse) than Japan ever was.
    • DR
      David R.
      4 March 2019 @ 23:46
      "Fed [will] actively and openly buy the S&P".... Well first many laws need to changed for the Fed to buy S&P, as that's effectively nationalizing companies. It's like communism. Even China and Russia have gotten away from that failed recipe, which is partly how China rose up from the dead. US best not go there, please!
    • TZ
      Tibor Z.
      6 March 2019 @ 18:16
      Can't the FED just be stopped to push up the markets? There won't be any fundamental value in the stock market like these days. I wanna buy cheap.
  • RB
    Rushil B.
    6 March 2019 @ 03:23
    He must be living in a parallel universe! The Chinese economy is falling off a cliff and they're simply short on USD reserves. There's a reason why the Chinese government keeps announcing fiscal measures every other month as well looses its monetary policy (be it benchmark interest rates as well as changing the banking reserve ratios). Moreover, capital flow restriction on all citizens (i.e., $150 a day withdrawal for all citizens - as far as I know) exist because of China'S USD shortfalls!! What George Soros describes as reflexivity (i.e., where the divergence between the objective reality and fictions we create become so great) is best demonstrated by Joe's views. I mean this with the utmost respect - eventually, the constructed myths (i.e., the recurring mentions of how the Trade war is about to end) reflects what we wish would occur is wishful thinking - the only question is how many more people / market participant truly subscribes to this story?
    • DR
      David R.
      6 March 2019 @ 10:42
      Rushil, speaking of George Soros, you might consider researching him some more if you care about his opinion. Specifically, Soros is on record saying that USD/CNY will go to parity, eventually. Reflexivity on US side.
  • KD
    Karl D.
    5 March 2019 @ 10:45
    Couldn't disagree more on the trade deal being good for Australia. I suppose you could argue that in the long run it's critical for Australia that the US and China have open trade, but in the short to medium term look at the content of the trade deal...China to increase purchases of US goods including: - Natural gas - Beef - Wine - Other resources and agricultural products .... these will displace, in large part, Australian goods. All this alongside China blocking some Australian coal imports and the bursting of the Australian property bubble. If the market is stupid enough to buy Australian dollars following a US-China trade deal, I'll be happy to trade some more of mine.
    • LC
      Lloyd C.
      6 March 2019 @ 09:21
      McDonald's and GE are now issuing AUD bonds and swapping to USD.
  • GF
    Gordon F.
    5 March 2019 @ 02:05
    I would not be so sanguine about a trade deal between the US and China. There are certainly advisers close to Trump who want to drive a harder bargain than China can tolerate. And I think the failure to sign a deal with NK in Hanoi a few days ago was a clear warning to China that the US means business. Can you imagine the loss of face for Xi if he flew into Mar-a-Lago to meet with Trump and sign the trade deal, only to have some last-minute conditions added on the US side, and he turns around and flies home without a deal? I don't say that this is a likely outcome, but it's a lot more likely than it would have been before the Hanoi debacle. As for Brexit, time is running short and tempers are rising.
    • DR
      David R.
      5 March 2019 @ 09:03
      "After Trump walked out on Kim Jong Un, don't expect a US-China trade deal" - Dr Michael Ivanovich US needs a trade deal as the US economy is currently falling a lot faster and the US trade sanctions are hurting US producers most in key Trump districts. US economic data has been plunging: US Citi Economic Surprise index crashing the most for Feb sinc 2008, US PMI released Friday showed price contraction for Feb for first time in years; US LEI looking recessionary; US Consumer Confidence in Q4 crashed the most ever and its bounceback for Feb released Friday far undershot expectations. NFP might be fine this Friday but NFP is a lagging indicator. Hedgeye has US in quad4 moving to quad3 this year (growth disappearing as inflation rises - stagflation) while Hedgeye data categorized most of Asia including China in Quad1 for the rest of 2019 (positive economic momentum and growth). What the poor US media fails to grasp, in constrast to the Asian financial media, is that the Chinese political cycle already pre-destined a major Chinese slowdown there for 2018-19, after Xi's "coronation" in late 2017. China pumped the economy for 2016-17 for Xi, then slammed on the brakes at the end of 2017. Just now they're re-opening the spigots in anticipation of their key 2021 event. Not unlike the US political cycle effect. The trade war effect is greatly exaggerated and stands a distant second to the effect of domestic economic policies, which are swayed by the political cycle - both in China and US. So likewise, easing financial conditions in the US starting now will ramp-up US in time for the 2020 election, after the recent/current bad US economic data turns upward later. US stocks see through this already and rebounded - they're not going to new lows again anytime soon.
  • LS
    Leigh S.
    5 March 2019 @ 03:33
    The Australian view is wrong in my view, its about to have its first recession in many years and I agree with Kyle Bass on China so little joy for Aust.
  • ml
    michael l.
    5 March 2019 @ 01:49
    A trade deal is not the end all and be all. Short-term pick-up may occur, but the issues are bigger than the trade dispute.
  • PB
    Paul B.
    5 March 2019 @ 01:14
    I disagree with this idea. This is not 2016 again. A trade deal isn't going to solve the global slow down, nor is credit stimulus.
  • JH
    Jesse H.
    4 March 2019 @ 22:07
    Agree with Steve H. here, who put it very well — lots of beliefs and a good amount of dogma, but unfortunately scant concrete data or reasoning provided for his bullish stance.
    • CB
      C B.
      4 March 2019 @ 23:28
      “I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it,'” Bank of Japan Gov. Haruhiko Kuroda said at a conference hosted by the BOJ
    • DR
      David R.
      4 March 2019 @ 23:36
      US date has deteriorated badly and was terrible last week especially Friday (PMI and confidence). Even if NFP is good this week, who cares as it's a laggard. Citi Economic Surprise index is pointing way down. Of course these data points could all turn up again. But technically, USD remains more bearish than bullish tho it's not decisive, yet. I'd trade the dollar with a bearish bias until it firmly stays above 98 DXY and preferably over 103.9 where it was merely 26 months ago. But you know that the Fed, Treasury and Trump will do whatever it takes to drive the dollar down; to quote Epsilon Theory's Ben Hunt, "they don't even pretend anymore". They want to tank the dollar to get a competitive edge. Biggest currency manipulators in the world - and liars about it too with their counterfactual "strong dollar" nonsense, while some folks repeat it like a brainless parrot.
    • DP
      David P.
      5 March 2019 @ 01:03
      Scant data I'd agree. Though the ongoing question of when (not whether) FX volatility resumes is critical...Sharp upward movement especially against EM currencies in next few weeks and could see a bit of repeat of last year with US equities outperforming ROW. To be determined whether that would also see a Q4 mean reversion this year...
  • RS
    Robert S.
    5 March 2019 @ 00:08
    I have never heared so many alternative facts at a time. I wonder why I can find such a clueless guy on realviaiontv
  • gg
    georgy g.
    4 March 2019 @ 20:34
    Love Joes unpretentious commentary. The likelihood of better growth in the 2nd half is non trivial. Keep bringing him back pls
  • PU
    Peter U.
    4 March 2019 @ 19:20
    • JD
      Jeremy D.
      4 March 2019 @ 20:28
      What are you referring to?
  • CB
    C B.
    4 March 2019 @ 18:53
    The bulls are emboldened by several decades of money printing. As long as the bulls have their monetary methadone, nothing can get them down.
  • SH
    Steve H.
    4 March 2019 @ 17:26
    One can always be confident that Mr. Trevisani's arguments won't be overburdened with data.
  • KW
    Kelvin W.
    4 March 2019 @ 15:01
    what the hell did i just read??
  • JA
    John A.
    4 March 2019 @ 14:02
    Whew! That was a quick recession. Glad that’s over! And, wow! Look at how cheap the market is now, after that correction...