US Dollar at Risk if Trump Pushes Fed to Dovish Stance

The biggest near-term risk to the US dollar is political pressure from President Donald Trump pushing the Federal Reserve into an overly dovish stance, said a senior executive at PGIM Fixed Income, Davide Barbuscia reported for Reuters.

The outlook could shift when Powell’s term ends in May.

Trump has repeatedly attacked Fed Chair Jerome Powell and other governors for not cutting rates more aggressively.

His attempt to remove Fed Governor Lisa Cook, and the appointment of adviser Stephen Miran to the board, have intensified investor concerns that the central bank may ease too much and let inflation accelerate.

“We do worry quite a bit about an abruptly dovish shift in the Fed’s reaction function going into next year,” said Daleep Singh, vice chair and chief global economist at PGIM, which manages nearly $900 billion in assets.

Speaking at a dollar conference at the Federal Reserve Bank of New York, Singh noted that while the Fed cut rates for the first time since December and is expected to lower them gradually, the outlook could shift when Powell’s term ends in May.

“There’s a very decent chance that the FOMC looks and acts quite differently,” Singh said.