The US Dollar has recovered from its period of weakness in early/mid-July. But what comes next? It makes sense to look at real yields, in the view of Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank.

The US economy is better protected against any headwinds than Europe

Following Covid in particular one could have assumed that some of the causes of the US’ economic resilience might have diminished. Perhaps it may no longer be that easy to entice US consumers into over-boarding consumerism. Perhaps – in their role as employees – these consumers may no longer be willing to work under conditions that we Europeans can only imagine for developing markets. Assumptions of this kind are unjustified from today's perspective. 

A few years of a pandemic have not changed US consumers substantially. And as a result, the US economy is better protected against any headwinds than Europe. That means capital expenditure in the US yields better longer-term. And that makes the currency that is required to make one’s capital work in the US – the US Dollar – more desirable and therefore more expensive.