If the Fed's upcoming tightening cycle were to be abridged because US growth tipped lower, unable to cope with the strain of even a modest sequence of interest rate hikes it would, at best, be problematic and, at worst, disastrous. The Fed would join the list of central banks which had tried to normalize interest rates only to find the economy could not cope. It would be another failed experiment to wean an economy off the medicine of super-accommodative policy without killing the patient. The global financial crisis has already challenged the previously held belief that economic policy could always find and provide a solution.

A Fed failure to maintain higher rates could be the final nail in that particular coffin. Were the renewed weakness in the US economy to be matched by questions over the Eurozone's revival or the ability of Chinese policymakers to underpin China's growth, the currency world would likely quickly revert to 'risk off'.

The trauma would be most acute for EM FX, particularly more vulnerable currencies (ie those with greater external financing needs and low FX reserve cover). The adjectives would need to extend beyond the 'fragile five' that suffered during the US taper tantrum of 2013 to the 'endangered eight" or perhaps the "traumatised twelve". Once again, those currencies with a need for foreign financing or exposed to capital outflows from foreign-owned local asset markets would be most at risk. Such fundamental filtering might help uncover likely under-performers, but a fresh downturn in global growth would likely see all EM FX suffer. Hence a truncated cycle for the "wrong" reasons would not see a wholesale USD sell off.

Here the reaction may be split between the core DM and the commodity producing currencies. The commodity currencies CAD, AUD NZD, would presumably sell off. By contrast, the EUR, JPY and CHF would rally.

The JPY and CHF would capitalise on their safe-haven status, the degree of strength curtailed by local policy action, be it further monetary easing or direct FX intervention. However, there is unlikely to be a policy reaction by the ECB and we would therefore expect the EUR to rise.

"GBP fortunes are largely dictated by UK rate expectations. If the US had to abandon its tightening cycle because of growth fears, would the BoE really be able to carry on raising rates? We suspect not, and GBP would be marked down accordingly. In the unlikely event it did then GBP would strengthen", says HSBC.

The USD would be caught between opposing forces. It could weaken on the more dovish outlook for US interest rates, but strengthen on its safe haven allure and its inverse relationship with commodity prices. Overall, the USD would likely rally against EM in this traumatised world.