Donald’s Dollar Dilemma

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“Only those who will risk going too far can possibly find out how far one can go.”

--T. S. Eliot

Commentary & Analysis

Donald’s Dollar Dilemma

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 President Trump has made it clear he wants to see the US trade deficit decline and appears willing to use all means necessary to achieve his goal.

Global macro analysis has shown there is truth to the idea a weaker currency may be the best single policy tool to help alleviate a trade deficit; with lag time of course. But herein lies the dilemma for President Trump—a trade war, some type of global risk-off event, and implementations of policies that lead to relative US growth are likely factors what will lead to a stronger dollar; at least over the near-term—and thus delaying any likely improvement in the trade deficit; thus, potentially leading to more trade concerns, more risk, etc.

Historically, strong relative economic growth and yield, driving capital flow, have corresponded in a powerful feed-back loop to push said local currency higher against competitors.  Read More...