Anyone who follows Alhambra knows that we keep an eye on the dollar. It is a very important part of our process of identifying the economic environment. A rising dollar, when combined with a falling rate of growth, can be a lethal combination. That was the situation in March and of course during the financial crisis of 2008. So the recent rally is something that has got our attention. For now, though, we don’t see any significant stresses in the system that would produce that kind of liquidity driven event.
The dollar has been in a short term downtrend since the spike and peak in the heart of the COVID panic back in March. The vast majority of that decline was compressed in a roughly 2 1/2 month period starting in mid-May and ending in early August.
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