Key Takeaways:
- 💸 The US dollar has weakened after the Federal Reserve’s dovish shift.
- 📉 Further falls of the US dollar are expected by Capital Economics.
- 🕰️ A period of consolidation is more likely in the near term.
- 🌐 Continued weakness of the greenback expected over 2025.
- 🇺🇸 Potential for the dollar to appreciate if Trump is re-elected.
- 📉 Employment could fall by 2.7% in 2028 and inflation could reach 6% by 2026 under Trump’s policies.
- 📈 GDP could be 2.8% lower by 2024 and employment could fall by 9% in a high scenario.
- 🚫 Trump’s immigration crackdown could lead to a significant loss of workers, impacting sectors like agriculture.
- ⚙️ Tariffs proposed by Trump could backfire, hurting the manufacturing sector the most.
- 💲 Attempts by Trump to influence Fed interest rates could lead to higher inflation, capital outflows, and lower living standards.
- 🏦 Fed Chair Powell cautioned against political interference in monetary policy.
- 🔁 In a scenario involving retaliatory tariffs and 8.3 million deportations, employment would be 9% lower by 2028 and inflation could surge to 9.3% by 2026.
- 🏗️ Trump’s policies would result in weaker economic growth, higher inflation, and lower employment.
- 🌍 The damage caused by Trump’s policies on the US economy would be extensive, affecting various sectors including manufacturing and agriculture.
Implications of the US Dollar Weakening and Trump’s Economic Policies
The recent dovish shift by the Federal Reserve has led to a weakening of the US dollar, a trend that is expected to continue according to Capital Economics. This could result in a period of consolidation in the near term, with further falls of the greenback anticipated over the next few years. However, there is a potential for the dollar to appreciate if Trump is re-elected, although his proposed economic policies could have significant negative effects on the economy.
Trump’s promises of tariffs, deportations, and attempts to influence interest rates could worsen inflation and harm employment. Employment could decline by 2.7% in 2028, and inflation could reach 6% by 2026 under his policies. In a worst-case scenario involving retaliatory tariffs and mass deportations, employment could be 9% lower by 2028, with inflation surging to 9.3% by 2026.
The impact of Trump’s immigration crackdown and proposed tariffs would be felt across various sectors, including manufacturing and agriculture. These policies could lead to weaker economic growth, higher inflation, and lower employment levels, highlighting the extensive damage they could cause to the US economy. Fed Chair Powell has cautioned against political interference in monetary policy, emphasizing the importance of maintaining independence to ensure stable economic conditions.