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Talking the dollar down may soon get easier for Trump

Section: Daily Dispatches

Why Trump's Tweets about the Dollar Might Soon Pack a Lot More Punch

By William Watts
MarketWatch, New York
Tuesday, June 11, 2019

President Donald Trump is again calling for a weaker dollar.

And that preference might now be starting to line up with market fundamentals, which means his pronouncements on the value of the currency could pack a lot more punch in the run-up to the 2020 presidential election, according to Alan Ruskin, chief international strategist at Deutsche Bank.

Trump took aim at the euro "and other currencies" that he described as “devalued against the dollar, putting the U.S. at a big disadvantage,” in a Tuesday tweet that also folded in another round of criticism of the Federal Reserve.

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A growing chorus of analysts has started to pencil in expectations for a weaker dollar in 2019, particularly as expectations grow for Federal Reserve rate cuts. Fed-funds futures, which six months ago were forecasting official interest rates to continue rising this year, now reflect trader expectations for as many as three cuts before year-end amid fears rising trade tensions could amplify a global economic slowdown.

If fundamentals favor a weaker dollar, Trump's efforts ito talk down the currency may prove more effective in the future, Ruskin said in a blog post.

Ruskin said a turn lower by the U.S. dollar isn't yet affirmed, particularly with market participants getting ahead of themselves when it comes to 2019 easing expectations. But efforts to talk down the currency in a dollar bear market are likely to be more effective than in a bull market.

"It is one thing talking down a U.S. dollar that has an upward bias. It is another pushing on a currency market where the door is slowing opening toward dollar weakness," Ruskin said. ...

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