Deema

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The election of Donald Trump to president had a profound impact on the global financial markets, especially the U.S. dollar. Let’s look at five times Trump moved the dollar and how this impacted the financial markets.

 

The time when he got elected and the dollar surged

It all started just with his election to be the next U.S. president. At first, investors didn’t really know what to make of Trump’s election victory, but that soon changed as market participants rallied behind the president’s pro-growth policies. The dollar surged in the wake of the November 8 election result, as investors priced in faster inflation resulting from tax cuts and fiscal stimulus.

In fact, Trump’s election victory would eventually send the dollar index to nearly 13-year highs.

 

The time his team unveiled a tax plan and the dollar rallied

On 26 April, Trump’s White House team unveiled their long-awaited tax reform plan, which was described as the biggest of all time.[1] The announcement spurred a rally for the greenback, which had declined sharply in each of the past two sessions.

The planned tax reform is extensive, which has raised concerns about how the Trump administration will make up for a large revenue shortfall. For their part, the Trump administration is counting on faster economic growth to make up for any shortage in revenue.

 

The time when he caused political drama and the dollar fell

Well it’s not really one time, now is it? Trump’s impact on the dollar hasn’t been entirely positive. In fact, the president has been at the centre of the greenback’s latest slide to seven-month lows.

Earlier this week, Trump found himself in political discord after a memo from then-FBI director James Comey surfaced. In the memo, Comey alleges that the president tried to end a probe into former national security advisor Michael Flynn, raising questions about whether obstruction of justice charges could be laid against Trump.[2]

 

The time when he said the U.S. dollar was “Too Strong”

Trump tanked the dollar, back in mid-April after telling The Wall Street Journal the currency is “too strong.”

“I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting—that will hurt ultimately,” Trump said in in a WSJ interview.[3]

He’s not entirely wrong. A stronger dollar has hurt corporate profits and weakened Washington’s trade position.

 

The time he pushed his protectionist rhetoric on the world

The president has struck a decidedly protectionist tone in his young presidency, and this too has influenced the dollar negatively. The greenback tumbled at the end of January as protectionist fears reverberated throughout the market.

Trump’s rhetoric shortly after inauguration was associated with a general sense of unpredictability about the next four years. Negative sentiment would trigger months of volatility in the dollar as investors recoiled at the uncertainty.
 

[1] Sky News (April 27, 2017). “Trump tax reform to be the ‘largest ever’.”

[2] Vikram Subhedar (May 17, 2017). “’Trump trauma’ dent global stocks, hits U.S. dollar.” The Globe and Mail.

[3] John Melloy (April 12, 2017). “Trump tanks the dollar after saying it’s ‘getting too strong’.” CNBC.

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