(25 July 2024 – United States) Despite Republican Presidential Nominee Donald Trump’s strong US Dollar depreciation rhetoric, FX experts anticipate a second Trump presidency would in fact drive the greenback higher.
Trump has remarked that recent USD strength has harmed American competitiveness while referencing generational weakness in the JPY and RMB.
Deutsche Bank purports that it would be exceedingly difficult for the incoming US government to manage the USD lower as it would incur trillions of dollars in intervention or policies aimed at encouraging enormous US capital outflows. Morgan Stanley supports that notion, arguing Trump’s proposed policies would prop the greenback dollar up. Barclays recommends clients pounce on the oversold nature of the USD to re-enter long trades.
“You have the dollar looking like it’s almost going to outperform regardless of the election. A lot of this has to do with weakness elsewhere. Initially it’s going to be a classic supply side shock And then there will be a Federal Reserve response, meaning the Fed will remain tighter for longer. In essence, the dollar remains higher for longer” stated Deutsche Bank Chief International Strategist, Alan Ruskin.
“Tariffs and their associated stronger implications for the dollar are significantly more likely to be the dominant market outcome than policies to pursue a weaker dollar” Deutsche Bank strategists wrote in a note.
“Even on its own, the tariff risk is enough to argue for a dollar rally. Even if fully retaliated, tariffs of the magnitude discussed by the Trump team would likely boost the dollar by up to four percent against currencies like the Chinese yuan” Barclays FX Strategist Themistoklis Fiotakis commented.
“The debate around the dollar’s outlook picked up after Trump’s recent comments on the currency weakness, but he is sticking to the view that tariffs will result in a stronger greenback. That’s especially true if retaliation from trading partners raises risks for the global economy. It is difficult for FX intervention to sustainably alter the trajectory of exchange rates. We believe investors generally share our view that the dollar would likely rise in response to trade tariffs being implemented, though these are far from uniform” stated Morgan Stanley FX Strategist James Lord.