What is Trump's US Dollar Policy?
|SOFT DOLLAR - When the Group of 20 (G20) gets together, there is always talk of some comments out of the event that could potentially have an impact on markets, that never actually end up having any impact. But this time was a little different. This time round, Trump was involved and the President's agenda of making America great again was certainly factored into the Group's communique. It has been common practice for the G20 to include an anti protectionism pledge in its communique. And yet, this pledge was absent this time round, with the likely cause coming on pressure from President Trump to have it removed. Why? In order to send a message that the US will be moving onto a path of pushing for American jobs, American manufacturing and American exports. The key takeaway here is that if Trump wants to do this, he will need to see a softer US Dollar. And so, the fact that the anti protectionism was taken out of the G20 statement could be sending a warning to the market about the US Dollar.
STRONG DOLLAR - Still, we need to take this with a grain of salt. The US Dollar had come under pressure at the weekly open because of this, but ultimately, there are other forces at play that could easily offset any US Dollar weakness from Trump protectionist policies. First off, remember Trump also has policies he wants to put in play that involve tax cuts and fiscal spending which are US Dollar supportive. This has been known as the reflation trade and could easily invite plenty of US Dollar demand. So yes. There is a conflict here with Trump's policies and we still don't know which side to prioritize. Of course, another US Dollar supportive theme is yield differentials. As much as the Fed still may want to sound dovish, the fact remains that the Fed is normalizing policy and will be hiking rates some more this year, which makes the US Dollar attractive. So while we shouldn't dismiss the possible US Dollar negative implication from Trump protectionism, we also need to be mindful of these other forces at play.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.