The future US president will appoint Elon Musk (together with Vivek Ramaswamy) to head a new office for government efficiency (independent of the Office of Management and Budget). Mr. Musk had announced during the election campaign that he would cut the US federal government's spending by $2 trillion (i.e. by almost a third). It doesn't take a rocket scientist to realize that this would have catastrophic economic consequences for the US economy, Commerzbank's Head of FX and Commodity Research Ulrich Leuchtmann notes.
USD consequences of an expansive monetary policy reaction to prevail
“Just recently, Mr. Musk celebrated the takeover of a media company very publicly, demonstrating that he does not believe in a gradual, cautious approach. The optimist might argue that Musk should behave more cautiously in view of the fact that it is now a serious matter for a country of 335 million people. But I don't trust him to take that intellectual step. Perhaps it is precisely this point that distinguishes the Westphalian pessimist from the currently optimistic currency market.”
“Furthermore, one could argue that the proposals that Musk and Ramaswamy will develop will only be proposals. The US President and the US Congress stand before implementation in actual policy. But one might wonder why such an agency is being set up at all if its proposals (which Musk and Ramaswamy will certainly not keep to themselves) will not be implemented. In this case, the president would appear to be indecisive and establishment-like – exactly what he does not want to be.”
“Incidentally, it would be quite clever to use such a radical austerity program to create a USD-positive argument. After all, this would significantly reduce the capital requirements of the US Treasury and thus of the US economy as a whole. US T-Notes would become scarce again and thus expensive. However, I think that the USD consequences of an inevitable expansive monetary policy reaction would likely prevail, at least initially.”
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD accelerates losses to 1.0930 on stronger Dollar
The US Dollar's recovery regains extra impulse sending the US Dollar Index to fresh highs and relegating EUR/USD to navigate the area of daily troughs around 1.0930 in the latter part of Friday's session.
GBP/USD plummets to four-week lows near 1.2850
The US Dollar's rebound keep gathering steam and now sends GBP/USD to the area of multi-week lows in the 1.2850 region amid the broad-based pullback in the risk-associated universe.
Gold trades on the back foot, flirts with $3,000
Gold prices are accelerating their daily decline, steadily approaching the critical $3,000 per troy ounce mark as the Greenback's rebound gains extra momentum and US yields tighten their retracement.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.