Trump to issue order expanding access to tax-exempt diesel fuel, sources say
President Trump's impending executive order to broaden access to tax-exempt diesel fuel is expected to bolster growth prospects in the U.S. economy by reducing operational costs for sectors reliant on diesel, potentially spurring demand. This fiscal measure could exert upward pressure on inflation, further influencing the Federal Reserve's monetary policy stance. Given the current economic climate, where inflationary pressures are already a concern, any shift towards fiscal support could strengthen the USD by enhancing rate differential positioning vis-à-vis major counterparts.
Where it sits in our coverage
Our current consensus target for EUR/USD is set at 1.075, reflecting a median across eight firms, with Goldman at the higher end of the spectrum at 1.12, while BofA maintains a lower target at 1.04. The overall bullish outlook in the wake of potential fiscal expansion aligns with sentiments shared by both JPMorgan and ING, who favor a positive growth trajectory for the USD.
How firms align
JPMorgan is aligned with the headline's view, projecting a target of 1.10 for EUR/USD, suggesting confidence in the USD's strength amid fiscal changes. In contrast, BofA takes a more cautious stance, advocating for a 1.04 target, reflecting skepticism about sustained growth from such measures. For specific insights, see our internal reports under /reports/jpmorgan and /reports/bofa.
What the data shows
Recent forecasts indicate an uptick in growth expectations as fiscal stimulus measures are possibly on the horizon, supporting USD strength. For more detailed analysis, refer to /research/fiscal-impact-usd-strength.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Trump's diesel order signals potential for U.S. growth; USD may benefit.
- 02Expect heightened volatility in USD pairs as fiscal expectations evolve.
- 03Watch for inflation data; rates could shift based on economic recovery signals.
Market implications
Looking ahead, market participants should monitor the upcoming inflation data release, as any unexpected shifts could prompt a reevaluation of the USD outlook. Our consensus target of 1.075 for EUR/USD remains critical, with an eye on economic announcements that could influence positioning in the following weeks.
Risks to this view
A significant dip in inflation or a slowdown in economic recovery could invalidate this bullish USD view, prompting a reevaluation of fiscal measures' effectiveness. Additionally, any setbacks in Trump's proposed policies could diminish market confidence and weaken the USD outlook.
Sentiment by currency
USD+EUR~JPY~GBP~Composite USD score: +0.30
Sources & References
How we cover this story