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Sep 29 - 12:55 PM

USD: The US Has Decoupled, And It Has The Strongest Labor Productivity In G10 - BofA

By eFXdata  —  Sep 29 - 10:45 AM

Bank of America Global Research argues that USD strength is likely sustainable as the US has decoupled from the rest of G10.

"Per capita GDP trends show a decoupling of the US from the rest of G10, and particularly the Eurozone, since the global financial crisis. This is also the case during the pandemic and, according to forecasts, for the years ahead. The USD strength during this period is consistent with the relative economic strength of the US. Focusing on labor productivity, which theory would suggest should be a more direct driver of FX equilibrium, leads to similar results," BofA notes. 

"We actually find faster US labor productivity improvements compared with that in the Eurozone since the mid-1990s, with the gap widening in recent years. The US also has the strongest labor productivity in G10, with the difference also increasing in recent years. Econometric evidence confirm that improvements in relative labor productivity lead to a stronger currency," BofA adds. 

Source:
BofA Global Research

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