Are we on the cusp of a currency war?

Last night Brazil’s Finance Minister reportedly warned of a global “currency war”. We think direct currency intervention by policymakers in the major western developed economies at least is very unlikely. But we continue to believe that the risk of global trade sanctions – which effectively amount to the same thing – is building. If domestic demand remains depressed, policymakers will inevitably turn their attention abroad for a solution as they did in the 1930s.