On Tuesday, November 5th, the American public will head to the polls to elect a new president. Currently, Kamala Harris is in office, but many believe Trump will win. Could Trump’s re-election push the US Dollar (USD) in a positive direction? Historically, US presidents have had a significant impact on the economy and the value of the dollar. Let’s explore how his return to power might influence the strength of the USD.
Table of Contents
Trump’s Strategy: A Strong USD?
During Trump’s first term, various factors contributed to the dollar’s movements. His focus on liberalization, deregulation, tax reduction, and pro-business policies sparked a rise in the value of the US dollar. Additionally, Trump took a protectionist stance against countries like China. Some believe he boosted the dollar’s value by increasing demand for US goods and services, which raised concerns in global markets.
Trump’s Return: Low Taxes and Higher Incomes?
If Trump returns to the White House, his economic policies could further strengthen the dollar. Lower taxes could attract investments, leading many companies to move their operations to the US, which would drive demand for the currency. However, this increased federal spending might introduce inflation, which could weaken the dollar in the long term.
Economic Policies
This election is poised to have a significant impact on Forex currencies and trading. Trump’s policies have previously ignited movement in the USD, particularly during his “Make America Great Again” campaign. This time, his focus on tax reductions and deregulation could spur economic growth and attract investments back to the US. A key issue in Trump’s campaign has always been boosting the USD. Tariff hikes are often used to impose economic penalties on other nations.
Market and Global Changes
The last time Trump won, the dollar index skyrocketed, but after he took office, there was a sharp fall due to sanctions. Over time, as the Federal Reserve introduced certain policies, the US economy stabilized, and the dollar regained strength. A strong dollar has a positive impact on reducing inflation, and Trump has stated his intention to boost the economy again.
Gold’s Role in the US Dollar
Gold has often reacted positively to Trump’s policies. In times of heightened tensions between the US and other major economies, gold becomes a safe haven for investors. With continuous inflation and the erosion of spending power, gold can still protect investors. During Trump’s previous presidency, gold surged from $1,000 to $2,000. Although many factors contributed to this increase, it serves as an important signal for the relationship between gold and the dollar.
Trump Politics: Tax and Trading Policies
Trump has advocated for tax reductions, particularly for the corporate sector. If re-elected, these tax cuts could stimulate foreign businesses and investments to enter the US. Trump could strengthen the dollar by boosting demand for US goods. However, prolonged trade conflicts may generate uncertainty in global markets. Uncertainty is not good for business, including the USD, as it shifts investor sentiment.
Federal Reserve
Trump has been highly critical of the Federal Reserve’s monetary policy, especially when the central bank raised interest rates during his term. If re-elected, he might push for lower interest rates, encouraging businesses to borrow more. This could create inflation and potentially weaken the dollar.
Geopolitics
Trump’s foreign policy, particularly with nations such as China, Russia, and Iran, could trigger waves of uncertainty. Currency markets often react to geopolitical tensions, with the USD typically strengthening as a safe-haven asset during crises. However, prolonged conflicts or erratic policies could have the opposite effect, destabilizing investor confidence.
Risk Watch
Trump’s re-election could provide some near-term gains for the USD, though risks remain. Trade wars, inflation, and Federal Reserve policies could undermine the dollar’s long-term strength. Additionally, the broader global economic environment, shaped by inflation, energy crises, and global supply chain challenges, will influence the dollar’s performance regardless of who occupies the White House.
Conclusion: What to expect in the future?
Trump’s return to office could propel the USD higher. However, the potential for trade conflicts, inflation, and unpredictable global relations makes this far from guaranteed. Investors should prepare for high volatility and closely monitor policy developments. Whether the USD rises or falls under Trump, his presidency will undoubtedly have a profound impact on global markets.
