I was on a call recently focussing on brands and branding. The speaker (NYU's Prof G) asked the audience what was the world's best brand?
I was thinking in terms of the great (mainly) US companies familiar to all of us and was surprised by his choice. He chose the US dollar and through it brand America and therefore by implication the Federal Reserve.
I studied, worked in and have followed currency markets for almost 40 years, yet the brand that is the USD didn't obviously come to my mind when he posed the question.
You may disagree with this answer but brand is in the eye of the beholder. Many crypto advocates would say this is a damaged brand, as evidenced by the development of the crypto world (more on that in a later piece). The brand that is the USD does not imply that its value cannot move higher or lower on a relative basis but that its credibility is (almost) indisputable. Given I believe Central Bank Digital Currencies are inevitable in the next 5 years, stay tuned for the Fed's soon to be released research on this.
If the USD is indeed the world's best brand, and it has claims to that title, this implies that the US Central Bank (The Federal Reserve) must demonstrate certain characteristics that underpin the USD. Analysts pour over every printed or spoken word from the Fed and Fed meetings are the most watched regular financial market announcement. The Fed is definitely front and centre in the financial world.
Assuming even partial agreement with my assertions, this would imply that what the Fed says and does really matters, for everybody. It also means that the primary question faced by currency forecasters is what will the USD do?
The Fed is moving quickly towards the removal of stimulus measures and eventually higher rates, perhaps in late 2022. The pace at which they move and communicate is of significance, but not as much as the direction in which they are moving. Market participants focus on the immediate impact of a Fed announcement, but it is the longer term direction that really matters.
Are you prepared for higher US interest rates? And, by implication, changes in the value of the USD?
As an aside, what do you think is the world's best brand?
This is the first of many short macroeconomic pieces that I will start to publish regularly, as well producing the larger thought pieces incorporating the values that Beckon Capital stands for.
David 'Bushy' Nolan
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