Barclays Bank has addressed concerns about the future of the US dollar, saying reports of its collapse are exaggerated despite the current political climate.
The company’s confidence in the currency comes amid a turbulent political landscape, with the Republican Party nominating Trump and Vance, and the Democratic Party seeing major changes following President Biden’s announcement yesterday that he will not seek re-election.
President Biden’s endorsement of Vice President Kamala Harris has significantly increased her chances of winning the Democratic nomination. Currently, former President Trump is leading in the polls in swing states, including against Vice President Harris.
The US dollar faces one of its toughest periods in 2024, with the Trump-Vance partnership in the spotlight. Both have advocated a weaker US dollar as a strategy to boost US manufacturing. Trump has criticized China and Japan for keeping their currencies low to help their exports, while vice presidential candidate Vance has raised questions about the benefits of the US retaining reserve currency status.
Despite these challenges, Barclays sees heavy tariffs on US imports, a key part of the Trump-Vance economic agenda, as a positive for the US dollar. The bank argues that even if other countries retaliate proportionally, the impact of US tariffs will support the strength of the dollar. Moreover, Barclays sees it as highly unlikely that the Fed under Jerome Powell will implement policies aimed at deliberately weakening the dollar.
Given historical precedent, a potential Trump administration might try to negotiate a new agreement similar to the 1985 Plaza Accord, which would require other countries to agree to strengthen their currencies. However, Barclays notes that such a consensus seems unlikely, especially with China, where exports have become a vital part of the country’s economic growth amid other struggling sectors.
In conclusion, Barclays maintains its positive outlook on the US dollar, indicating that the currency is likely to remain resilient.
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