Something for your Espresso – “Too Late”-Jerome Strikes Again
Greetings from Copenhagen.
Not a whole lot to report from yesterday’s FOMC meeting, which was clearly an exercise in Powell signaling nothing in either direction. We’re left with the sense that the Fed will largely stay out of the way (with a dovish lean), letting the economy and markets take the lead. That’s broadly positive for U.S. assets—both the USD and U.S. equities—and the dollar has already started to move following the meeting.
In effect, the Fed has allowed U.S. exceptionalism to reassert itself and deflated the “Sell U.S.” narrative. We see U.S. outperformance as increasingly likely in the weeks ahead, particularly in FX, where the USD remains massively oversold. Europe looks especially vulnerable in contrast, with our nowcasts flagging a much weaker growth picture there.
Chart 1a: Europe Regime Model
The Fed delivered a noncommittal message, but beneath the surface, a new internal divide is forming. With reflation risks quietly rising and the USD bouncing off oversold levels, we think U.S. assets are in for another leg of outperformance—especially if a weekend strike on Iran seals the geopolitical overhang.
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