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Dollar death is becoming consensus

Quick check on risk sentiment at 06:30BST...

Asia: 📈

U.S. Futures:📈

Yields are pushing slightly higher too, with the 10Y back to 1.61%...

This Twitter thread from Blackrock CIO Rick Rieder maps the current territory superbly 👇

 The #economy and #markets today present us with a type of confusing environment: a tremendous growth rebound amid concerns over different forms of #overheating due to policy being late to normalize, and then the uncertainty of an ultimately harsher policy unwind down the road…— Rick Rieder (@RickRieder) May 27, 2021 

 .#Investors are likely to continue to be forced to address their needs rather than their wants, while their #capital bases grow at a torrid pace, fueled by ongoing #liquidity injections.— Rick Rieder (@RickRieder) May 27, 2021 

TL;DR, investors be like

My capital base is growing too fast, and there aren't enough places to park it that generate a return #firstworldproblems

 What #market participants want and need to do is to protect the purchasing power of their #capital – but that has never been more difficult, as capital in search of a positive real #yield (adjusted for #inflation) is being forced into a shrinking pool of assets.— Rick Rieder (@RickRieder) May 27, 2021 

This last point is important for crypto, and especially Bitcoin.

Protecting purchasing power is the angle that Novogratz' Galaxy Digital (and plenty of others) are pushing.

Their head of derivatives was talking about it in this podcast 👇

Whilst regulators are sure to come in and spoil the retail party (to some extent) in coming years, the long game for crypto and Wall Street adoption is very much intact.  

This 'returns' problem will guide markets in coming years, especially if we see another recession and even more liquidity is pumped in...

If we accept the simple definition of inflation as

'too many dollars chasing too few goods'

Then we also accept that asset price inflation is caused by

'too many dollars chasing positive returns'

Which is why this happens 👇

 Recently, we saw the first time that BBB-rated #CorporateBonds did not offer a positive real #yield, in data going back to at least 2002, while BB-rated #bonds (a subset of high yield) only barely make that cut…— Rick Rieder (@RickRieder) May 27, 2021 

This continual hunt for yield will not just disappear in a financial system practically drowning in liquidity.

Worth remembering when anyone predicts major bear markets in equity indices.

Much like the death of the dollar takes, it fails to account for a replacement.

If equities are going to crash... Where is that capital heading instead? (and why?)

If the dollar is going to die, what replaces the global credit infrastructure?

Continuing with the dollar, lots of sell-side research pushing the dollar bear trade of late, and this from John Authers hit my inbox this morning...

Yesterday PBoC said the FX market was 'balanced' and that they will guide expectations to keep CNY basically stable on a reasonable and balanced level 👇

@Newsquawk

Today...

Just a gentle pushback on the pace of gains for now, another thing to keep an eye on though.

The dollar short trade is becoming increasingly consensus. That's not to say that a reversal is imminent, but it does make further short bets less attractive...

Big expiries in USDJPY today 👇

EUR/USD: 1.2185 (461M), 1.2200-10 (1.6BLN), 1.2215-25 (1BLN), 1.2250-60 (913M), 1.2265-75 (1BLN)

EUR/CHF: 1.0800 (420M), 1.1000 (760M), 1.1040-50 (328M)

EUR/GBP: 0.8625 (427M)

GBP/USD: 1.4150 (268M), 1.4200 (464M)

AUD/USD: 0.7750 (575M), 0.7800 (287M)

USD/CAD: 1.2000 (640M), 1.2050 (420M), 1.2100 (1.5BLN), 1.2150 (612M)

USD/JPY: 108.50-60 (915M), 110.00 (2BLN), 110.50 (1BLN)

EUR/JPY: 132.80-85 (480M), 133.00 (210M)Source: DTCC

On the calendar, U.S. personal income & spending plus core PCE data.

Scotiabank: these numbers should be looked through as mostly representing noise. The smoothed profiles of income and consumption gains as the economy reopens are what will matter.

But will they?

The data dump at 13:30BST could cause some short-term volatility ahead of the long weekend...