Synopsis: HSBC delves into the dynamic of the USD bubble, highlighting its unique trajectory. While the bubble has grown, the progression has been gradual and distinct from previous trends. Elevated US yields, rather than rapidly rising ones, characterize the current climate. The slowing global growth rate remains steady, not plummeting. Positive sentiment, stemming from the anticipation of central banks halting their rate hikes, had previously kept the USD's exceptional performance under control. However, the robust foundation for this optimism is waning, which could bolster the USD's support. Detractors argue that the USD bubble is on the brink of bursting due to its overvaluation. Yet, the currency's decade-long consistent appreciation, despite its overvaluation, counters this argument. The phenomenon of USD exceptionalism isn't recent, and its bubbly nature may endure.

Key Points:

1. The current USD bubble growth is gradual and different from past trends.
2. Factors such as elevated US yields and steady global growth deceleration shape this bubble.
3. Past optimism, linked to central banks' perceived end to rate hikes, kept USD in check, but this may change.
4. Despite claims of an imminent burst due to overvaluation, USD has shown a consistent strength over a decade.
5. USD's distinctive position isn't new and may prove more resilient than anticipated.

Conclusion: The USD's current bubble trajectory, while concerning to some, isn't necessarily alarming when contextualized. Factors that supported the USD in the past are changing, but this doesn't imply a fragile stance for the currency. The USD has weathered overvaluation for a decade, and its exceptionalism might continue to hold, proving more robust than some predictions suggest.