Investing.com – The U.S. 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 into recession, that doesn’t have to mean a weaker dollar, according to MacQuarie.
The dollar index, which tracks the U.S. currency against a basket of six other currencies, was up 0.1% at 101.325 at 07:00 ET (11:00 GMT), after hitting its highest level since Aug. 22 of 101.58 on Thursday.
Analysts at MacQuarie in their August 29 note said that the recent deterioration in the US labor market is causing concern because much of the debate about the ongoing and ongoing recession, as well as many recession indicators, center around trends in US labor market data.
This is the case even though the NBER’s “recession conclusions” are not so “rule-based” as to take into account only employment, but look at the economy more broadly.
However, even if the US moves closer to recession, it does not necessarily mean a weakening of the dollar, the bank added.
Other economies are also weakening (e.g. Germany) or are on track to do so (e.g. the UK), suggesting that they are on top.
Economic growth in Europe and the UK is still seen as being lower than in the US, especially in lightweight of Germany’s feeble (-0.1%) GDP in Q2.
But to keep hopes alive for monetary policy easing, investors need to see more signs of global disinflation.
The data did not disappoint in this regard, with subdued inflation figures from Germany and Spain predicting inflation to fall to 2.2% year-on-year.
