Oganes doesn’t fully agree with the idea that the dollar’s global dominance is ending. He believes this because there isn’t another currency or bond market that can easily replace the size and ease of trading found in the US dollar and the US Treasury market.
“This de-dollarisation, and this reduction in dollar exposure by the investors around the world will continue, but it is going to have a limit. But in that continuation that we are talking about here, in moving, let us say, from overweight to neutral, probably the dollar has more weakness to experience.”
Regarding the euro’s value compared to the dollar, Oganes mentioned their forecast that one euro could be worth between $1.20 and $1.22 by the end of the year.
He added, “We had a forecast that was already out of consensus of 1.14-1.16, and literally, we saw that being hit last week already, and we are still April. So probably, for the time being, we see weakness for the dollar.”
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Oganes believes that the uncertainty generated by the tariffs is likely to lead to a slowdown in growth, though it remains unclear if this will result in a full-blown recession.
He added, “At this minute you are going to see a global growth slowdown pretty much happening everywhere, some places more than others.”
Oganes expects inflation to remain higher in the US, primarily due to the increased cost of imports. Replacing imports, especially those from China, will take time as businesses adjust their supply chains and find alternative sources for goods. This process won’t be quick, meaning inflationary pressures will persist for a while.
Estimating the exact impact is challenging, but with the recent delay of tariff increases and some of the most significant hikes, Oganes predicts inflation in the US could stay around 4%, possibly 3.8%, by the end of the year.
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Globally, the situation will be more mixed. Slower growth in the US and other countries will bring deflationary pressures due to weaker demand. However, Oganes highlights concerns that China, unable to sell products to the US, may redirect these goods to other markets, potentially flooding the world with cheap exports. This could lead to deflation in many countries.
Some nations may also respond by increasing tariffs on Chinese imports to protect their own industries. The impact on inflation will depend largely on the policy decisions made in response.
One factor that could help energy-importing countries, like India, is the decline in oil prices. If local authorities allow international price drops to be reflected in domestic fuel prices, it could help offset some of the inflation caused by tariffs.
For full interview, watch accompanying video
