Fundamental Forecast for US Dollar: Bearish
Talking Points:
- Trade wars carry a global risk, but the blowback to the Dollar is too often under appreciated
- Talk of corporate buybacks is starting to lose its speculative momentum but Q2 earnings is to start
- Monetary policy is another consideration for USD[1] trading with the Fed’s report to Congress and CPI
The Dollar’s Standings in Trade Wars
There has been a lot of reference to trade wars ‘finally’ starting this past week when the United States’ $34 billion tariff on a list of Chinese goods – and China’s concurrent retaliations – went into effect. However, this economic scourge has been underway for weeks. The metals tariffs with which the US initially kicked off the growth-at-others’-expense approach has been in place for some victims for a while. In the end, the mere threat of large scale import taxes is enough to draw attention to the fact that the markets have run well beyond the bounds of reasonable value – and are in no way close to a meaningful discount. Yet, for the Dollar’s part, the risk in the retaliation to the United States’ policy. China has directly met the US tit-for-tat and intends to do the same in approximately two weeks when another $16 billion duty goes into effect. Where the real risk lies is in the application of pressure on developed world counterparts – like the European Union, Canada and Mexico. Few countries will be interesting in siding with China given its history of flouting open trade rules, but other major economies would be more than willing to band together in order to protect their own economic interests from the
