Dollar : less bang for your buck

The rapid decline of the dollar since the beginning of the summer of 2020 raises the question of whether it has entered a long correction phase. The Covid crisis has indeed accentuated the imbalances in the US economy. Faced with the fall in the national savings rate, the sharp increases in the public and current account deficits, as well as in the Fed's balance sheet, will make the dollar less attractive, all the more so as real long-term rates will remain durably negative. In this new Cross Expertise, we analyse the potential impact of a dollar correction of around 20% on global growth and certain asset classes. We begin by analysing the impact of such a fall in the dollar on growth and inflation in the Eurozone and the United States and the potential reactions of the ECB and the Fed. We then examine the impact of a dollar depreciation on commodities that are very sensitive to the dollar's price, on US long rates, on equity and credit markets and finally on Latam currencies.