As we wrote last month, the sustained strength of the Dollar has become a serious impediment to US trade and current account balances, as well as corporate earnings. The President has recently upped his attacks on the greenback, calling on the Fed to take on larger cuts to short-term rates. However, since most Fed policymakers believe the economy is still running strong, all things considered, they’re likely to continue their measured easing approach. Regardless, lower rates appear to have already stoked inflation, which will push down US real rates that have already flattened and, in turn, weaken the Dollar through 2020.
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