Investing.com – The US dollar could be kept persistently low despite the possible support for any descale in tariff tensions, according to analysts of Barclays (Lon: BARC), who add that this weakness could boost European actions.
In a client note, analysts led by Emmanuel Cau said that they do not see a “solid reason” so that the green ticket cootes well above its fair value, which estimated at around $ 1.15 compared to the euro.
The dollar listed approximately 10% from the maximums reached in January, while investors care about the impact of the severe tariff policies of US President Donald Trump and fears that he can dismiss the president of the Federal Reserve, Jerome Powell.
However, after Trump’s statements on Tuesday, hope that the recently adverse approach to the White House towards commercial negotiations with China may be softening.
Trump told journalists that the American taxes on the second largest economy in the world would decrease after ensuring an agreement, although he pointed out that tariffs would not fall completely to zero.
The secretary of the Treasury, Scott Besent, also said that although the discussions with Beijing would be an “arduous work”, he believes that both countries can calm the growing commercial tensions.
-Meanwhile, Trump seemed to retract his harsh criticisms of Powell, saying that “he has no intention of saying goodbye to the Fed leader.
Before Easter weekend, markets feared Trump could be preparing to dismiss Powell for not acting quickly enough to cut interest rates. The suggestions of an important White House advisor that officials were considering whether to say goodbye to Powell also disturbed investors.
Trump seemed to try to placate these fears, adding that he would only like Powell “to be a little more active in his idea of lowering interest rates.”
Even so, Barclays analysts said that, even with Trump softening the rhetoric to Powell, the Fed will continue to face “Dovish pressure.”
“This would probably even more erode market confidence in the integrity of the green ticket, increasing the risk premium for maintaining dollars,” the strategists wrote.
The continuous risks raised by Trump’s “erratic governance” could also weigh on the dollar and make the treasure markets “nervous,” they added.
