Dollar bears looking for that Goldilocks scenario on the US economy

If there’s one takeaway from yesterday, it is that bad news is still good news for stocks. That so long as it is not bad enough to warrant a profound economic slowdown, and that also means bad news for the dollar.

In other words, dollar bears are betting on a soft landing scenario – where the economy runs rugged and we do get a slowdown in the months ahead. But just as long as it isn’t one that leads to a deeper recession and/or stagflation, and also avoiding the risks of some other part of the economy breaking – like we saw with the banking crisis in March.

More simply, the bears are hoping to stick a soft landing while avoiding a hard landing in the US economy. It’s sort of like a Goldilocks scenario essentially.

If the US economy stays more robust and data is still strong, that will vindicate the Fed’s higher for longer narrative on interest rates. If the US economy crumbles like a piece of paper all of a sudden, a hard landing will trigger real economic fear and spread out globally which in turn translates to haven bids back for the dollar in return.

So, what dollar bears are wanting is something in between that. And at the end of the day, it all ties back to the main question here.