We believe the US dollar remains in a long-term bear market against its major trading partners, like Europe, Japan and selective EM markets. This view is backed by long-term investor positioning and the twin US deficits. However, the short-term outlook has been clouded by the recent rise in US yields and softening economic data outside the US.
Year to date, global equities have finished 17 trading days with a move of greater than 1% up or down, compared with just three in all of 2017. Yet, having traded within a 10% range, they are roughly flat on the year at the time of writing (Fig. 1). Behind this volatile and directionless trading pattern are at least three areas of heightened uncertainty: geopolitics, trade, and interest rates.