"Dollar’s desert exile soon to end For many market participants, there appears no end to dollar disappointment. For James Malcolm, this is the best reason yet to hope for a turnaround. He argues that the structural legacy long in dollars has washed out, and the macro hedge fund community has all but given up. Yet near term catalysts are present in the form of warmer weather helping US data, continuing China slowdown and potentially aggressive policy responses from other G3 central banks.
And finally...Janet Yellen’s affiliation to the ‘optimal control’ path of policymaking looks set to be one of the key differentiating features of her Fed chairmanship. Briefly, this approach has emphasized a lower Fed funds rate path than implied by more traditional metrics like Taylor Rules. George Saravelos notes that the Fed has now released the model underlying the optimal control forecasts, the coyly named FRB/US. Now we can play around with the equations, Saravelos expects a better market understanding of the Fed’s reaction function."