From Marc to Market:
Investors are wary of the unwinding one of the most crowded trades, long the AI ecosystem. Despite cracks, the market remains resilient. So far, the rise in interest rates has not derailed the narrative. The dollar’s fortunes also seem to be to some extent linked the AI. It seems clear that the significant US current account deficit has been largely financed by foreign flows into the US equity market. While some observers see shades of the tech bubble, it is notable that while the Nasdaq Composite peaked in February 2020 and the S&P peaked six months later, the Dollar Index did not peak until July 2001. Even then, the sharp dollar decline did not begin in earnest until April 2002.
The dollar is mixed. The Australian dollar and Norwegian krone are the strongest in the G10, gaining 0.3%-0.4%. The euro, Japanese yen, and Swiss franc are slightly softer. The euro has derived little support from the easing of the tensions within European bond markets. The French premium, for example, as narrowed from over 150 bp to about 135 bp today, while the euro remains trapped in its trough, having recorded new lows for the year on Monday, slightly below $1.1155. Meanwhile, India has engineered a short squeeze of the rupee and the PBOC continues to encourage a gradual appreciation of the yuan through its daily fix....
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