Macro Moments Weekly: Another day, another dollar

“Another day, another dollar,” was a phrase coined by sailors in the 19th century. Commercial sailors were paid by the day, so the boredom of a long sea voyage would be offset by its pecuniary rewards.

The one thing the US dollar has not been this past week is boring, and its weakness—falling to a four-year low—suggests that when our mariners make port, their wages may well not be worth what they had hoped for! The long end of the Treasury market didn’t shift much last week; it certainly was not fazed by a 10-2 Federal Reserve (Fed) vote for no change in interest rates and saw mild movement at the announcement of the next Fed chair. But in the foreign exchange market, momentum is everything, and US Treasury Secretary Scott Bessant is but the latest King Cnut against the waves.

The movement in the dollar this past week accelerates our view for 2026, where we see economic conditions aligning positively for emerging markets. The loser in this circumstance is clearly Europe, and this could cause the European Central Bank to re-start interest-rate cuts. Spain, the standout economy in Europe, saw growth beat expectations in the fourth quarter (Q4) at 0.8%¹ and inflation drop from 2.9% to 2.4%.² Meanwhile, France managed a surprisingly positive 0.2% growth in Q4,³ whilst inflation barely existed, at 0.7%.⁴

Equities

The standout story I see for equities is artificial intelligence (AI). Not Meta’s capital expenditure programme of US$135 billion but the weakness in the losers. SAP, RELX and Experian all had torrid weeks. Perhaps the most effective way to gauge the growth of AI is by looking at the results from those most impacted, rather than those participating in its rollout. Without doubt, the market will likely move in advance of their announcements. Software services, cloud services and data aggregators are all to be watched. The defensive castle moats they built with data are drying up, as anyone can programme, search and find, scrape and code.

Parting shot

Having spent the week travelling across the United Kingdom’s great northern cities, I was struck by the vibrancy and enthusiasm I found. Business and new buildings are thriving on a diet of innovative services and tech. This has challenged the prevailing conventional wisdom of the United Kingdom. Brits love a moan, lamenting about taxes, black holes in the deficits, higher-for-longer interest rates and a decade of poor choices from politicians of any hue. So how come this economy hasn’t rolled over and died? How has it managed to grow under such negative pressure? How come exports and employment⁵ are at record highs? The answer lies in the buzz of Birmingham and motivation of Manchester. And we are not listening to it—but maybe we should.