As a shutdown and debt ceiling deal looks increasingly likely on Wednesdayafternoon we ask whether it makes sense to consider the long dollar tradeagain. Our global economics team argues that rates markets have priced a farless aggressive tightening cycle than has been realized historically (first graph).They note that slow rate hikes have historically been associated with higherinflation five years ahead and the market is likely to test the Fed’s credibility onforward guidance in the future.
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Deutsche Bank