The USD being revalued upwards used to be viewed as almost unthinkable. However, the current economic and geopolitical environment leads us to believe that the possibility of the USD being revalued is no longer 0%.
In recent months we have seen geopolitical tensions between the United States and China increase due to factors ranging from the coronavirus to the political turmoil in Hong Kong. These events, combined with an understanding of the global financial system and the USD as the world’s reserve currency, give us confidence to state that the United States revaluing the USD higher is starting to become a possibility.
A revalued USD would be one of the most significant financial events of our lifetime. It would cause significant volatility across markets and would have a deteriorating effect on geopolitics. Yet, there is a chance of this happening. And because of the implications that this will have for markets, investors need to consider this possibility as a significant tail risk event.
In this IceCap Global Outlook, our Global Strategist Keith Oland, has prepared an overview of the geopolitical environment concerning the United States and China, and the risks that this tension poses to global trade and the economy. Previously considered unthinkable, we discuss the possibility of the United States revaluing the USD to be used as a foreign policy tool against China, and dive deep into its possible effects—including its impact on investors.
If you have any questions, thoughts, or would just like to discuss further, please don’t hesitate to reach out to us anytime.