Expert Commentary

David Sloan, Senior Economist at 4CAST, on US economy and Greenback
Tue, 28 Mar 2017 10:01:03 GMT
Source: Dukascopy Bank SA
 
© 4CAST
The US economy is close to full employment and continues leading in world economic competition, though Trump's trade policy changes may lower economic growth. Do you share this point of view or not? Why?

I think that there is a risk that Trump's policies could hurt economic growth in case there is an aggressive action on trade. Up to this moment, we have not seen anything that would clearly damage the picture. Apart from that, there is also a possibility of more fiscal stimulus, thus, at the current moment we feel that the economy can maintain the respectable pace of momentum close to 2% over the course of the year. 

Inflation keeps rising at a quicker-than-anticipated pace. In your opinion, should we expect inflation to rise above the 2% target or not? Why?

The headline inflation numbers are moving ahead of the 2% target with past weakness in prices dropping out.  The core rate is slowly creeping towards the 2% target if you look at the PCE price index; however, it is not there yet. Nevertheless, I expect it to be very close to 2% by the end of the year.

What conditions may undermine the Greenback's role as the dominant international currency?

I think that the main risk to the Greenback would be any major protectionist initiatives coming from the Trump administration. Other than that, the US Dollar's fundamentals are quite strong at the moment with the economy performing reasonably well and the Federal Reserve looking to raise interest rates. Still, it is an uncertain picture because no one really knows what we are going to see under Trump's administration; however, at the moment, the Dollar's fundamentals look quite strong, to my mind.


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