Macro Briefing: 13 November 2024

The US dollar index rose to a six-month high on Tuesday, fueled by expectations for rising inflation risk during a second Donald Trump presidency. The reasoning is related to the possibility that the Federal Reserve may curtail or perhaps reverse rate-cutting plans if inflation rebounds due to potentially reflationary policies driven by higher tariffs and other policy plans outlined by the president-elect. Higher interest rates tend to support a higher dollar relative to other currencies. The Fed would “continue to take a cautious tone going forward, especially in light of what we view as heightened inflation risks in a second Trump term,” predicts Win Thin, global head of markets strategy at Brown Brothers Harriman.

Mexico suggests it plans to respond to any trade restrictions imposed by President-elect Donald Trump on Mexican exports to the US. “If you put 25 percents tariffs on me, I have to react with tariffs,” Marcelo Ebrard, Mexico’s economy minister, warns in a radio interview on Monday. “Structurally, we have the conditions to play in Mexico’s favor.”

Global levels of planet-heating pollution from fossil fuels are expected to reach another record high this year, predicts the Global Carbon Project, a group of scientists who track emissions. Fossil fuel pollution is set to rise to 37.4 billion metric tons this year, up 0.8% from 2023. Global emissions from coal, oil and gas are all projected to increase.

US oil production is unlikely to surge after Donald Trump becomes president, predicts energy analyst via Rigzone.com. “There is a recent media narrative that the second Trump administration will lead to a surge in U.S. oil production, with producers eager to drill and produce more when unincumbered by perceived Biden-era bureaucracy,” writes Standard Chartered Bank Energy Analyst Emily Ashford in a report. “This is a flawed narrative, in our view. US oil production, and particularly unconventional (or shale oil) production has changed significantly since Trump first took office in 2017, and there are substantial barriers to rapid production increases within the timeframe of a presidential term.” US crude oil output was 13.401 million barrels per day in August, reports the US Energy Information Administration (EIA). “This is a new all-time high, exceeding the previous record of 13.308 million barrels per day set in December 2023.”

US consumers’ expectations ticked down in October, according to survey data published by the New York Fed. “Median inflation expectations fell at all three horizons in October,” the bank reports. “One-year-ahead inflation expectations declined by 0.1 percentage point to 2.9%, three-year-ahead inflation expectations declined by 0.2 percentage point to 2.5%, and five-year-ahead inflation expectations declined by 0.1 percentage point to 2.8%.”