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 EURUSD, +0.2210%[1] “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[2].
This is because the Euro and other currencies are devalued against the dollar, putting the U.S. at a big disadvantage. The Fed Interest rate way too high, added to ridiculous quantitative tightening! They don’t have a clue! https://t.co/0CpnUzJqB9[3]
— Donald J. Trump (@realDonaldTrump) June 11, 2019[4]
A growing chorus of analysts have 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. 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 USD (U.S. dollar) that has an upward bias, it is another pushing on a currency market where the door is slowing opening toward USD weakness,” Ruskin said.
“The president’s tweets on the USD have the potential to have much more lasting impact in the coming election year,” he wrote.
Indeed, the dollar might be more of a talking point on the campaign trail in 2020. Democratic contender Elizabeth Warren, a U.S. senator from Massachusetts, earlier this month called for “more actively managing our currency value to promote exports and domestic manufacturing.”
Read: Elizabeth Warren calls for ‘managing’ the dollar, and a new agency, to create jobs[5]
Trump last August did brag — on Twitter[6] — that a strong U.S. economy had money “pouring into our cherished DOLLAR.” But analysts weren’t convinced[7] it marked a change in the president’s preference for a weak currency.
Indeed, Trump’s frequent dollar bashing long ago signaled a break with a “strong...