Trump Trade Divergence Won’t Last Long As Real Rates Rise: BoAML

The U.S. dollar’s climbdown from a 14-year high has marked the first divergence in the so-called Trump trade since the Republican was elected president. It may have been fueled by President Donald Trump’s comment that the dollar was “too strong.” From a high of 103.82 at the beginning of January, the dollar index has slid to 99.233, but cyclical stocks and commodities continued to perform well. This, says BAML’s Liquid Insight team, is symptomatic of the divergence between U.S. real rates and breakevens, and won’t last. The bank expects real rates to move up to end the divergence, rather than…