The Fed meeting last week led to higher asset price volatility across asset classes. A handful of economic indicators suggests that the US economy may be on the verge of slowing down over the next quarters. If the US government does not approve the planned infrastructure package or increase welfare spending the Fed would likely soon revert to a dovish stance for a longer period. On the other hand, if the Biden Administration succeeds in keeping the economy running hot by passing the ambitious infrastructure investment programme and/or boosting welfare policies inflation could well become a serious problem. Either way, we believe the Dollar’s sharp move higher last week represents an opportunity for Emerging Markets (EM) local currency assets. Alongside progress on vaccinations across most EM countries, a lower Dollar would allow EM local assets to outperform, even in an environment of higher nominal US interest rates. EM central bank policies have already turned more hawkish, which provides further carry support at a time when EM real interest rates are already higher than real rates in the US and other developed economies.