Safe-haven flows drive the dollar higher

The US dollar looks set to end the week stronger against most major currencies, nearing its strongest level since 2002 as “risky” assets remained under pressure. A key reason for the dollar’s rally is that weak activity data out of the US, including the ISM survey data released today, added to growing concerns about global growth. What’s more, policymakers largely shrugged off such concerns at the ECB’s Sintra Conference earlier this week, reiterating their commitment to taming inflation even at the cost of weaker growth. Next week’s minutes from the last FOMC meeting may well add to that picture. All in all, we think this backdrop will continue to favour the dollar. EM Drop-In (Thurs, 7^th July): Join our economists for their regular monthly briefing on the hot stories in EMs – and those that aren’t getting the attention they deserve. In this 20-minute session, topics will include the outlook for EM FX markets after the recent sell-offs. Register now.