(Bloomberg) -- Financial markets may be witness to a massive rally led by the dollar if Donald Trump pulls off the biggest fiscal stimulus push since the 1980s.
That's the view of Steven Englander, global head of Group-of-10 currency strategy at Citigroup Inc. He estimates the greenback could jump more than 10 percent against both the euro and yen if the president-elect and Congress carry out most of their stimulus programs while the labor market strengthens. That could “easily” propel the dollar past 90 cents per euro and 130 yen, Englander said, without specifying a timeframe.
“We can see a huuuge, not a baby, USD move ahead,” Englander wrote in a note following the release of December's employment report. “This would be the biggest fiscal shock since the Reagan period” if Trump's plans are carried out and the Federal Reserve stays hawkish.
Englander's estimates are more bullish than the median forecast of analysts surveyed by Bloomberg, who expect the dollar to finish this year at about $1.06 per euro. That's not far from $1.0528, where it traded as of 2:26 p.m. Friday in New York. The greenback is predicted to weaken to 115 yen by year-end from 117.05 Friday.
The Bloomberg Dollar Spot Index, which measures the greenback against 10 major peers, has surged more than 5 percent since Trump's election victory in November. The currency has risen on speculation that the president-elect's spending pledges will fuel inflation and prompt the Fed to tighten monetary policy.
To contact the reporter on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net. To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net, Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka, Mark Tannenbaum
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