Dollar bears looking for that Goldilocks scenario on the US economy

<p>If there's one takeaway from yesterday, it is that bad news is still good news for stocks. That so long as it is not bad enough to warrant a profound economic slowdown, and that also means bad news for the dollar.</p><p>In other words, dollar bears are betting on a soft landing scenario – where the economy runs rugged and we do get a slowdown in the months ahead. But just as long as it isn't one that leads to a deeper recession and/or stagflation, and also avoiding the risks of some other part of the economy breaking – like we saw with the banking crisis in March.</p><p>More simply, the bears are hoping to stick a soft landing while avoiding a hard landing in the US economy. It's sort of like a Goldilocks scenario essentially.</p><p>If the US economy stays more robust and data is still strong, that will vindicate the Fed's higher for longer narrative on interest rates. If the US economy crumbles like a piece of paper all of a sudden, a hard landing will trigger real economic fear and spread out globally which in turn translates to haven bids back for the dollar in return.</p><p>So, what dollar bears are wanting is something in between that. And at the end of the day, it all ties back to the main question <a href="https://www.forexlive.com/news/which-comes-first-low-inflation-or-the-economy-breaking-20230711/" target="_blank" rel="follow">here</a>.</p>

This article was written by Justin Low at www.forexlive.com.