What is the impact of global easing on US asset appeal?

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Global Easing Enhances Appeal of US Assets

The widespread implementation of easing policies by major central banks worldwide has significantly boosted the attractiveness of US assets, leading the dollar to achieve its longest winning streak in a decade. This trend has made standing still in monetary policy, as the US Federal Reserve is doing, a relative form of tightening compared to other economies that are actively easing. Consequently, traders are exhibiting a reluctance to divest from the US dollar, even for short-term positions.
Dollar's Dominance and Broad Gains

The US dollar experienced a substantial rally in January, with the Bloomberg Dollar Spot Index climbing 3.3 per cent to 1,167.89, its highest point since data collection began in 2004. This marked the first time the dollar has achieved a seven-month winning streak. The greenback appreciated by 6.7 per cent against the euro, reaching $1.1291 per euro, and strengthened against all but five of its 31 major currency peers during the month.
Divergent Monetary Policies Drive Demand

The appeal of US assets is further amplified by the contrasting monetary stances of global central banks. While the European Central Bank announced a €60 billion per month sovereign-bond purchase program until at least September 2016, and the Bank of Canada cut its benchmark rate, the US Federal Reserve maintained its pledge to be "patient" regarding interest rate hikes. This divergence, where other central banks are easing and the US is holding steady, effectively represents a relative tightening of US monetary policy, making dollar-denominated assets more appealing.
Economic Recovery and Future Fed Actions

The US economy demonstrated resilience, growing at a 2.6 per cent annualised rate in the last quarter, following a robust five per cent expansion in the preceding three months. Federal Reserve officials, such as St. Louis Fed President James Bullard, have indicated a potential mid-year start for interest rate increases, citing economic growth and declining unemployment. While the Federal Reserve's official statement noted improving labour conditions and an expected return of inflation to around two per cent, analysts suggest this language does not signal an immediate greater concern about inflation, which is viewed as positive for the dollar. Futures markets are pricing in an increase in the Federal Reserve's main lending rate to at least 0.5 per cent by December.

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What is the impact of global easing on US asset appeal?

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