Some food for thought on the next possible direction for Trump’s trade shake up
ING talk about trade in one of their latest notes;
Will the White House take their trade war into the currency arena?One of the bigger risks specific to FX markets in the near-term is whether the US administration chooses to take its trade clampdown into the currency arena. We’re expecting the US Treasury’s FX report anytime now – and we note in our preview how officials could technically label Thailand a ‘currency manipulator’.Doing so, in our view, would put additional pressure on trade surplus countries – such as Germany, Japan and China – to stay clear of any policies that depress their currencies, which naturally lends itself to a weak USD (and strong EUR, JPY and CNY) trading environment. And under this backdrop, we feel the trade-weighted US dollar could still fall another 5-10% over a multi-year period.
That’s a fair call about the direction Trump could take next, and one that will bring further volatility direct to FX markets.