Core Viewpoint - The dismissal of Federal Reserve Governor Cook by President Trump raises concerns about the Fed's ability to control inflation, leading to a steepening of the U.S. Treasury yield curve, with the spread between 5-year and 30-year yields reaching its highest level since 2021 at 116 basis points [1][4]. Group 1: Market Reactions - The market speculates that Trump will appoint a more dovish policymaker to replace Cook, which aligns with his stance on urging the Fed to ease monetary policy, potentially lowering short-term rates but risking higher long-term inflation expectations [4]. - Following the announcement, the dollar index initially fell but recovered some losses after Cook stated she would not resign, indicating market sensitivity to changes in Fed leadership [6]. Group 2: Political Implications - Trump's action to remove Cook could allow him to appoint loyalists who support rate cuts, which may further challenge the independence of the Federal Reserve, a key factor in maintaining the dollar's safe-haven status [5][6]. - The Federal Reserve Board, consisting of seven members nominated by the president and confirmed by the Senate, may see a shift in its composition towards more dovish members if Trump successfully appoints new governors [5]. Group 3: Economic Impact - The recent developments have intensified negative sentiment towards U.S. assets, with traders seeking alternatives to the dollar and Treasuries amid concerns over the Fed's independence [5]. - Standard & Poor's recently reaffirmed the U.S. AA+ credit rating but warned that political developments undermining the Fed's independence could put this rating under pressure [5].

Core Viewpoint - The former president of the Asian Development Bank, Masatsugu Asakawa, stated that the U.S. dollar is more susceptible to being sold off, making it unlikely for Japan to accept the U.S. request to support the yen [1] Group 1 - The U.S. has made requests to Japan regarding the support of the yen [1] - Asakawa emphasizes the volatility of the U.S. dollar in the current market [1] - Japan's stance is influenced by the potential risks associated with dollar fluctuations [1]

Group 1 - UBS's report addresses ten challenging questions from investors regarding global economic conditions and strategic outlook [1] - The report highlights that current tariffs impose an effective GDP tax of approximately 1.5% on U.S. importers, with global growth tracking at a mere 1.3% year-on-year, placing it in the 8th lowest historical percentile [1] - The report indicates that the recent dollar sell-off is not indicative of a long-term depreciation trend, as it lacks key elements seen in previous cycles, such as improved economic growth in other regions [2] Group 2 - The initial impact of tariffs on U.S. inflation data is expected to manifest in the July CPI report, with significant effects potentially delayed by one to two months [3] - There is a notable discrepancy between reported trade data and container shipping data, suggesting that foreign exporters are not significantly lowering prices to absorb tariff costs [4] - The U.S. budget deficit is primarily influenced by the 2017 tax cuts, with concerns about supply issues persisting, but historical demand fluctuations are expected to absorb any supply increases [5] Group 3 - Evidence suggests a reduction in foreign investors' exposure to U.S. assets, with April data indicating asset sell-offs, although the continuation of this trend remains uncertain [6] - The U.S. stock market typically outperforms during global GDP slowdowns, but the current slowdown is largely driven by the U.S. economy, with European markets showing unexpected resilience [7] - The "One Big Beautiful" Act is projected to provide a 45 basis point boost to economic growth by 2026, despite initially increasing the deficit [9] Group 4 - Central banks globally are adjusting their policies in response to tariff impacts, with expectations of 1-3 rate cuts, while the Fed faces a dilemma balancing inflation and employment concerns [10] - China has implemented fiscal stimulus measures equivalent to 1.5-2% of GDP, with further monetary easing anticipated, including a potential 20-30 basis point rate cut [11]

Group 1: Impact of Tariffs on Global Economy - Current tariffs impose an effective GDP tax of approximately 1.5% on U.S. importers, and even with a trade agreement, it is unlikely that tariffs will decrease significantly [1] - Global growth tracking estimates a current annual rate of only 1.3%, which is at the 8th lowest percentile historically [1] - There is a significant divergence between hard and soft data following tariff announcements, with a peak gap not seen in 27 years [1] Group 2: U.S. Dollar Dynamics - UBS is bearish on the dollar from a cyclical perspective but does not view this as the start of a long-term depreciation trend [2] - The current dollar sell-off lacks key elements that characterized past long-term declines, such as improved economic growth in other regions and reduced risk premiums [2] Group 3: Inflation and Tariffs - Initial impacts of tariffs are beginning to show in private sector data, but delays in transmission to official consumer price indices are expected [3] - Significant effects on CPI from tariffs are anticipated to manifest in July's data, which will be released in August [3] Group 4: Global Exporters' Response - Evidence of a "tariff rush" in Q1 indicates that trade volumes have not yet stabilized despite price increases [4] - There is little evidence that foreign exporters are absorbing tariff costs by lowering export prices, and the impact of dollar depreciation on their profits is noted [4] Group 5: U.S. Fiscal Outlook and Global Interest Rates - The majority of changes in budget deficits stem from the extension of the 2017 tax cuts, with no fundamental changes expected post-election [6] - Concerns about supply issues persist, but historically, demand fluctuations have been more significant than supply [6] Group 6: Capital Flows from the U.S. - There is a widely accepted view that foreign investors are reducing exposure to U.S. assets, supported by April's international capital flow data [7] - The ongoing decline of the dollar suggests that foreign exchange hedging may be a driving factor behind this trend [7] Group 7: U.S. vs. European Stock Markets - U.S. stock markets typically perform better during global GDP slowdowns, but the current slowdown is primarily driven by the U.S. economy [8] - Comparisons reveal that U.S. valuations are exceptionally high while European markets appear relatively cheap [8] Group 8: "One Big Beautiful" Act's Economic Impact - The "One Big Beautiful" Act is projected to increase deficits before 2026, with a total reduction of $0.4 trillion over ten years [8] - The act is expected to provide a boost of approximately 45 basis points to economic growth by 2026 [8] Group 9: Central Banks' Response to Tariff Escalation - Central banks have shifted their views due to the absence of retaliatory measures and dollar depreciation, with expectations of 1-3 policy rate cuts [9] - The current situation is viewed as simpler than a "stagflation" scenario, allowing for potential easing policies [9]

Group 1 - The core viewpoint of the article is that the upcoming non-farm payroll data is expected to have a significant impact on the direction of the US dollar, with a potential for a stronger euro and other non-USD currencies if the data is weak [1][2][4] - Citigroup's global foreign exchange strategy team predicts that the unemployment rate will rise to 4.4% with only 85,000 new jobs added, which could trigger widespread selling of the dollar [1][5] - The report indicates that even if the non-farm data is weak, the dollar's decline may be limited due to high expectations for the Federal Reserve's interest rate cuts and pre-existing short positions on the dollar by leveraged funds [1][7] Group 2 - Citigroup maintains a bearish outlook on the dollar, emphasizing that the current market environment presents ongoing asymmetric risks for the dollar [2][4] - The report suggests that if the non-farm data aligns with Citigroup's predictions, the market's pricing for a July rate cut by the Federal Reserve could increase significantly, potentially reaching a 50% probability [5][6] - The euro-to-dollar exchange rate is unlikely to break the 1.20 level without additional catalysts, as the unemployment rate is expected to rise and non-farm employment growth is projected to slow [6][9] Group 3 - Key factors limiting the euro's rise include the high threshold for a July rate cut by the Federal Reserve, market positioning with increased dollar short positions, and the upcoming Independence Day holiday which may lead to profit-taking [7][9] - Citigroup believes that for the euro to stabilize above 1.20, clearer signals are needed, such as the unemployment rate approaching 5% by year-end or adjustments in foreign exchange hedging ratios due to lower hedging costs [9]

Core Viewpoint - The dollar bear market has just begun, with a large-scale sell-off expected in the coming months as institutional investors adjust their portfolios [1][5]. Group 1: Institutional Investor Behavior - Institutional investors are in the process of reallocating their portfolios, which may lead to significant dollar sell-offs [5]. - Many long-term investors are actively seeking opportunities to reduce their dollar exposure [5]. - The recent information suggests that the rebound of the dollar after the easing of U.S.-China trade tensions is likely a temporary phenomenon [5]. Group 2: Economic Context - The U.S. dollar has depreciated over 5% this year due to concerns over economic slowdown and rising inflation triggered by the trade war [2]. - Foreign holdings of U.S. securities have doubled over the past decade, reaching an unprecedented $32 trillion [6]. - A potential wave of dollar sell-offs could be triggered by foreign investors, particularly Asian exporters, as they liquidate accumulated dollar assets [6]. Group 3: Future Predictions - Jens Nordvig predicts that the dollar is facing a significant structural shift, suggesting a long-term decline [1][6]. - The combination of structural capital flows and the cyclical forces of the Federal Reserve is expected to lead to a substantial drop in the dollar's value [7]. - Investors are advised to prepare for potential increases in the euro and gold prices as the dollar weakens [8].