USD: Haven demand focus into Trump SOTU – DBS

DBS analyst Philip Wee highlights that markets are focused on President Trump’s upcoming State of the Union Address (SOTU), with investors seeking haven exposure ahead of the event. The report notes expectations that Trump will push his “America First” economic vision, including much lower interest rates and a smaller Federal Reserve balance sheet, while investors await clarity on his tariff strategy.

Haven flows eye Trump policy signals

"Markets expect SOTU to become his rallying cry for the 2026 midterm elections amid sagging approval ratings. Trump is expected to address affordability issues with populist measures such as capping credit card interest rates at 10%, lowering prescription drug prices, and restricting corporate dominance of the housing market."

"To resell his “America First” economic vision to the public, Trump will expect Kevin Warsh to follow his roadmap toward much lower interest rates and a smaller Fed balance sheet to boost US growth to 15%."

"Investors will want clarity on how Trump intends to circumvent the Supreme Court’s ruling to maintain his tariff policy, i.e., by relying on short-term emergency statutes as a bridge to establish more permanent and investigation-backed tariffs."

"Tariffs are Trump’s primary tools for economic and geopolitical leverage – tariff revenue to replace or offset federal income taxes, tariffs as a weapon of choice to get foreign nations into trade deals, and tariffs to force companies to move manufacturing back to the US."

"Foreign nations will be looking for SOTU to signal a return to constitutional norms or a more aggressive, blunt-force approach using the administration’s remaining executive powers."

"The latest tariff episode adds a layer of political risk, diluting the USD’s traditional haven appeal. While it does not signal an imminent USD crisis, USD rallies could prove shallower and more episodic going forward."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)