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US Fed needs to halt rate cuts to sustain strong dollar, says Ed Yardeni
Ed Yardeni, President of Yardeni Research described the economic outlook in Europe as fairly disappointing and stated that Japan has shown reluctance to raise interest rates. With the Fed likely slowing down on rate cuts, Yardeni anticipated that the dollar could continue to rise.
Ed Yardeni, President of Yardeni Research, said that the US Federal Reserve may need to halt its rate cuts if the dollar remains strong. Yardeni said that the US economy is robust, and his company, Yardeni Research, has maintained a positive outlook on the dollar.
He stated that a few months prior, the dollar was weaker as the market expected multiple rate cuts from the Federal Reserve, which Yardeni believed would have been a mistake. He added that both the bond market and the dollar’s performance supported this view. According to him, by stopping or reducing rate cuts, the Fed would help sustain the dollar's strength.
Yardeni explained that a stronger dollar typically results in weaker foreign currencies, including the yen and the euro. He pointed out that when tariffs, such as those imposed by former President Trump (during his first term), dampen global economic activity, they can drive down commodity prices, which in turn weakens the currencies of commodity-exporting countries like Canada, Australia, Brazil, and Indonesia.
Meanwhile, Yardeni described the economic outlook in Europe as fairly disappointing and stated that Japan has shown hesitation in raising interest rates. With the Fed likely slowing down on rate cuts, Yardeni anticipated that the dollar could continue to rise.
Also Read: Gold prices near one-month low amid strong US dollar: Will rates drop further?
Regarding emerging markets and India, Yardeni stated that a return of Trump to the presidency would bring a different global environment compared to the Biden administration or Trump’s first term. Yardeni speculated that Trump could implement a 10% tariff on all imports and as high as 60% on goods from China, which could potentially slow down global economic growth. He suggested that while US consumers would bear these higher costs, increased tariffs could reduce demand for imports from overseas, indirectly impacting international trade and economies dependent on exports to the US.
For more details, watch the accompanying video
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He stated that a few months prior, the dollar was weaker as the market expected multiple rate cuts from the Federal Reserve, which Yardeni believed would have been a mistake. He added that both the bond market and the dollar’s performance supported this view. According to him, by stopping or reducing rate cuts, the Fed would help sustain the dollar's strength.
Yardeni explained that a stronger dollar typically results in weaker foreign currencies, including the yen and the euro. He pointed out that when tariffs, such as those imposed by former President Trump (during his first term), dampen global economic activity, they can drive down commodity prices, which in turn weakens the currencies of commodity-exporting countries like Canada, Australia, Brazil, and Indonesia.
Meanwhile, Yardeni described the economic outlook in Europe as fairly disappointing and stated that Japan has shown hesitation in raising interest rates. With the Fed likely slowing down on rate cuts, Yardeni anticipated that the dollar could continue to rise.
Also Read: Gold prices near one-month low amid strong US dollar: Will rates drop further?
Regarding emerging markets and India, Yardeni stated that a return of Trump to the presidency would bring a different global environment compared to the Biden administration or Trump’s first term. Yardeni speculated that Trump could implement a 10% tariff on all imports and as high as 60% on goods from China, which could potentially slow down global economic growth. He suggested that while US consumers would bear these higher costs, increased tariffs could reduce demand for imports from overseas, indirectly impacting international trade and economies dependent on exports to the US.
For more details, watch the accompanying video
Click here for all the updates from the Global Leadership Summit
Catch all the latest updates from the stock market here
(Edited by : Unnikrishnan)
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