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Lagarde Gives the Dollar What It Needed — a Peak

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The US dollar might just have peaked, and if it has then a blog post by Christine Lagarde has a lot to do with it. The president of the European Central Bank chose Monday morning to post an essay to the ECB website, effectively setting out a new and more hawkish policy. Both the policy itself and the fact that she had felt the matter so urgent that she needed to launch it online between meetings helped strengthen the euro significantly against the dollar. The leap almost to $1.07 is clear from a currency chart:

Effectively, she outlined a rationale for the ECB to turn away from a decade of aggressively dovish monetary policy and committed the bank to two interest rate hikes by September, which would bring its overnight interest rate back up to zero. That is still a lenient monetary policy by any definition, but after years of negative rates it’s a big deal. Here is the key passage from her…

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