Local factors will decide carry trade winners
In April, Standard Chartered predicted lacklustre US data would lead to dollar weakness, before this gave way to risk weakness (and a dollar rebound) later in the second quarter. Since April 11, the DXY index has traded in choppy fashion between 81.33 and 83.19. Dollar outperformance in Q1 was largely due to economic divergence, with the US strong, Asia mixed and Europe in recession. Since peaking at 0.448 on February 28, the Bloomberg US Economic Surprise Index (ESI) has fallen to –0.229
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