The Prospects of a Weaker Dollar

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Let me be clear, what I said was, it’s not the beginning of a long series of rate cuts
Fed Chairman Jerome Powell – 7/31/2019

What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world....
President Donald Trump – Twitter 7/31/2019

With the July 31, 2019, Fed meeting in the books, President Trump is up in arms that the Fed is not on a “lengthy and aggressive rate-cutting” path. Given his disappointment, we need to ask what else the president can do to stimulate economic growth and keep stock investors happy. History conveys that is the combination to win a reelection bid.

Traditionally, a president's most effective tool to spur economic activity and boost stock prices is fiscal policy. With a hotly contested election in a little more than a year and the House firmly in Democratic control, the odds of meaningful fiscal stimulus before the election is low.

Without fiscal support, a weak dollar policy might be where Trump goes next. A weaker dollar would stimulate export growth as goods and services produced in the U.S. become cheaper abroad. Further, a weaker dollar makes imports more expensive, which would increase prices and in turn push nominal GDP higher, giving the appearance, albeit misleading, of stronger economic growth.

In this article, I explore a few different ways that President Trump may try to weaken the dollar.