Barclays FX Chief: Recent Dollar Losses Look Overdone

The head of FX sales at Barclays said weak global growth could limit further losses in the dollar.
“Frankly, the move over the past week or so has been a bit overdone,” Kristen Macleod, co-head of global FX distribution at Barclays, said in an interview on Monday.
While Barclays expects some further dollar depreciation, “to see a more sustained and longer-term dollar decline, you need to actually see a very large improvement in global growth outside the U.S.,” he said.
Last week, weaker-than-expected U.S. inflation data sent the dollar and U.S. Treasury yields lower, with traders trimming expectations for further rate hikes by the Federal Reserve. Market corrections are notable, such as the Swiss franc hitting its strongest level against the dollar in eight years.
The data reinforced the view that U.S. policymakers can achieve a “soft landing” for the economy, lowering inflation without causing a recession. Typically, in this “benign risk environment, the U.S. dollar underperforms relative to high-spread, high-beta currencies,” he said.
This time around, though, weak global growth, particularly in the euro zone and China, should keep flows flowing into the relatively resilient U.S., underpinning the dollar.
“If you’re going to see a sustained uptick in the euro from where it’s at, that’s really going to require a more steady flow of funds out of the U.S. and into Europe,” he said. “But the economic growth over there has been so disappointing.”