The ongoing fallout across financial markets from President Trump’s “Liberation Day” announcement has resulted in a sharp fall in the dollar and what looks increasingly like a generalised loss of confidence in the US as a safe haven in currency and bond markets. Our base case is that the situation will stabilise, and both the dollar and US Treasuries will recover some ground. But some of the damage may prove longer-lasting, and the range of plausible outcomes has widened significantly – mainly for the worse.
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