Societe Generale: A mild recession in the US could weaken the dollar
Kit Juckes, a strategist at Societe Generale, pointed out that the US economy faces the risk of falling into a mild recession, which could trigger larger rate cuts and lead to a weaker dollar. He said that the slowdown in growth and high stock valuations could repeat the mild recession scenario of 2001. Looking back at history, the Fed cut rates from 6.5% to 1.0% in 2001-2003, and the dollar index subsequently plummeted by 40% over the next seven years. Juckes warned, "If concerns about inflation, economic growth, asset valuations, and market bubbles ultimately tip the scales, causing the economy to slide into a (still mild) recession, the declines in interest rates and the dollar could both exceed our expectations."
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