Thirty years ago this month, the U.S. was powerful enough to muscle its way out of a damaging trade imbalance when it took financial markets by surprise with the Plaza Accord. In that agreement, it persuaded Japan, Germany, France and the U.K. to join in coordinated action to help weaken the dollar.
Now, the Federal Reserve’s willingness to raise its interest-rate benchmark, along with currency-weakening stimulus from other central banks, has strengthened the dollar enough to risk crimping U.S. inflation and casting a cloud over corporate earnings. The greenback is already within 8 percent of a record high, according to the Fed’s Trade-Weighted Broad Dollar Index, and the danger is tighter monetary policy may supercharge its rally.
I personally think Bloomberg is wrong here and many are on a one sided trade and are gonna get crushed.
I would say without a doubt the most lopsided trade in the world right now is the long dollar trade. Virtually everyone has become convinced that the dollar is going to 110, 120 or even 160.
Folks when everyone is thinking the same thing … then no one is thinking.
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