The twilight of US exceptionalism and the USD: a tale of two (or three) capital flows

FX Focus

The notion of US exceptionalism has come under heavy strain since President Donald Trump’s inauguration on 20 January. Markets worry that: (1) the Trump 2.0. policies would be detrimental to the US economy and further increase stagflation risks; and (2) economic outlook fears have eroded the appeal of US stocks and bonds and fueled portfolio rebalancing out of USD assets.