Citi strategists consider {that a} Trump presidency is unlikely to result in a weaker greenback, regardless of some elements suggesting in any other case.
The Wall Avenue agency’s base case stays that the US election can be constructive for the greenback. They consider this end result will possible be totally priced in by the November 5 election.
“We reiterate why we think the election will be USD positive in our latest FX Forecasts, however, we recognize Trump comments in a recent interview imply a desire for a weaker USD,” they famous.
Polls and betting markets have shifted in Trump’s favor because the June 27 debate. Whereas Citi notes that such traits may be unstable and topic to vary, they emphasize that it’s nonetheless too early for lengthy USD election trades. The latest USD weak spot was attributed to the unwinding of the French election premium and dovish Fed repricing, however Citi believes the USD has now largely caught up to those elements.
Strategists warning towards untimely lengthy USD trades, noting that market sentiment can swing, notably because the election approaches and the Democratic candidate turns into extra outlined. They counsel ready till August or September to think about lengthy USD trades, traditionally a interval when markets start to commerce elections extra actively.
A key facet of their analysis focuses on , with decrease ranges remaining their favored expression within the G10 house. They level out that Trump’s give attention to commerce and broader relations with the EU may cap any EURUSD rallies, notably across the 200-week transferring common, which has been a big resistance degree.
Addressing currency-related feedback from Trump’s latest interview, Citi highlights Trump’s acknowledgement of a “big currency problem” because of the sturdy greenback and weak yen and yuan.
Whereas a few of Trump’s advisors have pushed for a weaker USD, Citi remembers that in his first administration, regardless of efforts to weaken the greenback, commerce dynamics finally supported a stronger USD.
The analysts conclude that until there’s a coordinated worldwide effort to weaken the greenback, which they don’t foresee, Trump’s insurance policies are unlikely to be USD detrimental regardless of his feedback.
“In 2018-2019, when Trump pivoted from domestic growth policy to trade, increasing rhetoric on trade and tariffs saw higher,” strategists highlighted.
“Absent a coordinated, international effort to weaken the USD , we do not expect Trump policies to be USD negative despite the rhetoric,” they concluded.