Below-trend US growthHigher US inflationDeclining productivity/dynamism
These are classic characteristics of an underperforming economy but it's also a 180-degree turn from what markets were expecting at the close of the US election. Trump 1.0 talked a lot about tariffs but ultimately focused on growth and boosting equity prices. Now, it's looking more like that was a product of his first cabinet rather than his core instincts.
1) Tariffs
2) Growth
The main fear is that there is an administration in place that thinks it can re-write the rules of economics. We've seen protectionism fail many times before and this will be no different.
3) Deficits
4) The rules and norms
5) Immigration
6) Fed policy
This is a tail risk but earlier this month, a US judge allowed Trump to move forward with the firings of two top officials at the Federal Trade Commission. If it's allowed to stand, it would pave the way for him to fire Federal Reserve officials, including Jerome Powell. It's a fight that's headed to the Supreme Court but the FX implications are obvious. If the US central bank loses independence, it will be stacked by loyalists who keep rates low, undermining the value of the dollar.
This article was written by Adam Button at www.forexlive.com. Read More Details
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