A recessionary tilt in the US does not have to mean a weaker dollar

Investing.com – The US dollar got a boost overnight with the release of stronger-than-expected second-quarter growth data. And even if the U.S. economy is headed for recession, that may not mean a weaker dollar, according to MacQuarie.

At 07:00 ET (11:00 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, traded 0.1 percent higher at 101,325 after climbing to an all-time high August 22 level at 101.58 on Thursday. .

The recent deterioration in U.S. labor market conditions looks worrisome because much of the recession-on/recession debate and so many recession indicators focus on trends in U.S. labor market data, analysts said. at MacQuarie in an August memo. 29.

This is the case even though the NBER’s “recession calls” are not so “rules-based” as to look only at jobs, but at the broader economy.

However, even if the US is heading into recession, that may not mean a weaker dollar, the bank added.

Other economies are also experiencing weakness (e.g. Germany) or are set to see weakness (e.g. UK), suggesting they are also at the top.

Growth is generally seen to be worse in Europe and the UK than in the US – especially given Germany’s weak Q2 GDP print (-0.1%).

However, to maintain hope for policy easing, traders need to see more signs of disinflation globally.

The data did not disappoint on this front, with modest inflation prints coming from Germany and Spain, forecasting a drop in inflation to 2.2% year-on-year.