ING FX Strategy Research discusses the USD outlook into the coming year and makes a case for not calling for the start of another USD bull cycle in 2018, on the back of the following 3 reasons.
1- The economics for a stronger dollar doesn't add up. Without genuine supplyside reforms, the Trump tax bill is adding to the fiscal deficit without changing the long-run trend growth in the US. That is textbook dollar negative
2- The politics for a stronger dollar doesn't add up. It's clear that the President does not want a stronger dollar – the administration’s protectionist concerns remain a simmering risk for 2018.
3- But most importantly, the rest of the world is growing – and catching up to a US economy that is far later in its cycle.
"Admittedly, we need the details of the final bill to conclude the overall effects, but for now – we remain firmly in the camp where US tax ‘reforms’ will not be a game-changer for a weakening $," ING argues.
Source: ING Global Markets ResearchOriginal Article
