There has been talk for some time of the Federal Reserve keeping the value of the U.S. Dollar in mind when considering interest rate changes. The currency war, and all that.
So, the Fed seems to keep looking for reasons NOT to raise short term rates, despite their 'data dependent' stance on decision making.
All of this is due to the U.S. economy being the best of a bad lot, so to speak, in the world.
We now have two weak ISM surveys in a row. What if the U.S. economy is slowing, despite the 'weak' dollar.
How long would it take to get to the point where the Fed had to actually DEFEND the dollar?
What would that look like? Weak dollar. Slow economy. Inflation as a monetary phenomenon.
Would long bonds hold up with a serious dollar weakening?
Is the present dollar weakening just a response to expectations of fiscal stimulus? Perhaps....
What if there are actually some bond vigilantes out there? I bet there are too many of them.