DXY Rally: Is the Dollar About to WRECK Global Markets?

"This trap locks the BOJ into ultra low rates, which fuels the yen carry trade, where investors borrow yen at negligible rates and sell it to buy higher yielding assets abroad. It's essentially a trillion dollar liquidity machine that constantly pushes the yen lower."

"Under pessimistic forecasts, the UK's national debt could balloon to nearly 274% of GDP by the 2070s. And with debt already hovering around 100% today, that's hardly the kind of backdrop that inspires confidence in the pound."

"Meanwhile, European leaders have recently committed to spending 5% of GDP on defense. That's a massive bill. And to cover it, the ECB will likely have to step in with largecale bond purchases. In other words, quantitative easing. And we know QE puts downward pressure on a currency."

"So whether it's the yen, the pound, or the euro, the story is the same. Profound structural problems that point to continued long-term weakness against the dollar. That said, these problems aren't unique. The US isn't exactly keeping its own fiscal spending under control either. The difference is that compared to every other currency, the dollar is still likely to be the last one standing. Simply put, it's the best of the bad bunch."

"And when the DXY starts pushing higher, all those borrowed dollars will become more expensive and capital will rush back into the dollar, driving it higher. And when that happens, squeeze will become too much to bear and global markets could crash."