I am a complete novice, so I am probably wrong, but here goes,...

I am a complete novice, so I am probably wrong, but here goes, this is my understanding, happy to be corrected....

The decline of the US$ is a tailwind for ARB



As seen in the graph below, the US dollar index (DXY) was lower from 04-15 helping the US rebuild their industrial base after the GFC. The US central bank may be happy to see the US dollar decline back to that 80 level on the graph below. By printing more money than its competitors it can lower its currency, increase its competitiveness and rebuild again. What other tool does it have left?



The only problem is, every other country is following the US in trying to lower their currencies by printing.

With the interest rate lever out of action globally, US debt levels climbing and fiscal stimulus constraints, the US central bank will continue to print to counteract any major market weakness. The mother of all moral hazards perhaps.

Eventually this global coordinated printing over a long time will lead to the US 10 breakeven inflation rate rising. And the system will eventually rebalance itself again.