Like it or not, central bankers just engineered a breakout in the USD. Now, all they have to do is convince investors that this is a good thing.
Of course, by “good,” we’re not talking about macroeconomic impact on inflation, trade, or employment. Those things might matter to the few portfolio managers still focused on fundamentally-based investing — but, not to the folks actually driving Mr Market.
We’re talking about the yen carry trade, which drives trillions in investments worldwide and has been almost solely responsible for the unending rally since 2011.
The yen carry trade thrives on dollar strength and yen weakness. So, it absolutely loves the idea of a dollar/USDJPY breakout — as long as it lasts.
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