US | Dollar strength through the Global Coronavirus Recession
While the Global Coronavirus Recession is shifting most macroeconomic goal posts in 2020, we reinforce our earlier call for a strong dollar through the year. In fact, the current conditions strengthen our belief in some key dollar drivers.
Along with the current volatility and uncertainty around growth outlooks, the tenuous relationship between interest rate differentials and exchange rates over the past five years has made these traditional dollar predictors less valuable.
Instead, the US dollar should benefit from its safe haven status in the current environment. Extreme global policy uncertainty along with a historically profound contraction in activity should add support.
According to our analysis, the dollar has appreciated by 6% on average over the last six recessions since 1973, while it has strengthened by 3% during more moderate downturns.