LOCKED MI2 Chart Point: What’s on Our Radar

A key component of US Exceptionalism is the reflexive cycle between US asset prices and the economy. As the current account deficit has risen parabolically since 2020, the necessary offsetting rise in the US's capital account surplus has been funded via foreigners lending money to the US government, or buying US assets. The recent break in the DXY, suggests that foreign appetite for US assets is ebbing. This is happening just as we are getting evidence of increasing fragility in the US Labour market.