The talk or threat of currency wars is heating up once again as analysts and economists weigh and conjecture the language and policy approach the new administration is bringing forward in the United States.
A currency war is where countries talk down or implement a policy to better their terms of trade against their partners, as a weak dollar will stimulate domestic demand and ideally boost exports.
The downfall of is, if everyone engages, it’s a race to the bottom.
The initial assumption south of the border was that a Trump presidency would be inflationary and contribute to a strong dollar, but it seems we’ve taken a ‘180’ where now the risks are engaging in weak dollar policies.
The implications are one that is weak for global growth, thus impacting the Canadian economy and has some economists talking even leaves the Bank of Canada in a position to potentially cut rates.