text: Good morning. Here’s your Economic Early Warning for Thursday, 09 June 2022.TODAY’S BRIEFING:READ TIME: 7 mins 23 secondsInFocus: Weekly Economic OutlookECONOMIC WARNING INTSUMInFocus: Weekly Economic OutlookThe dollar index (DXY) has recently started to fall following its bull run since the beginning of the year. From its near all-time high of almost 105 last month, the DXY has fallen nearly 2.5%. The DXY increased from 96.26 to 104.85 in just four months. What has changed, and why is the dollar’s strength beginning to fall again? First, uncertainty from policymakers and Fed officials on the general plans for rate hikes during September and possible plans for a hike-pause has led market participants to grow concerned over where the future of the dollar stands. This concern has emerged as a narrative for quantitative tightening without recession is gaining traction, completely dependent on whether the Fed overdoes rate hikes. The DXY is also falling because demand for the dollar has fallen. With recession fears easing slightly, foreign investors are beginning to rotate back into their own currencies as they gain against the dollar. This raises eyebrows when looking at the status of the dollar as the world reserve currency. As the demand for alternative currencies continues to increase, at what point does that trend stop? Granted, we are a long way away from where we were following the initial shock of Covid. This decrease in the DXY is not happening from a global shock event; instead, the actions of several individuals holding high positions in the Fed. Observing the Chinese yuan, for example, demand is increasing for the Chinese currency because it is not only gaining against the dollar but because normal returns in the stock market become more significant as the value of the underlying currency increases, compounding on one another.For domestic implications, the seeming turn of the DXY from ‘non-pandemic’ consequences results in domestic markets turning to the upside. Sentiment to domestic markets increases as sales in other currencies increase for large multi-national companies, such as Apple, where foreign sales will then convert into more USD when profits are sent back to the States. Effectively, this means more earnings, better earnings per share (EPS), and higher share prices. Whether a higher market will lead to a reinstation of faith in markets, compounding a problem of overvalued and overheating sectors, or serve as a vessel to get the economy out of a rut where GDP is slowing is yet to be seen. As we move into the weekend, CPI will be released this Friday. The DXY typically reacts without regard to the CPI report, and with expected inflation to remain at around 8.2%, any surprise will have a minor movement effect on the DXY. Historically, months-long trends seem to have no real correlation. – T.W.ECONOMIC WARNING INTSUMBank officials predict whirlwind ahead