Trump wants a weaker USD - AmpGFX

In view of the Greg Gibbs, Director at Amplifying Global FX Capital, a factor that may have caused some weakness in the USD this year is that Trump and his administration officials have at various times continued to imply that major USA trading partners, including China and Germany, have used policies designed to weaken their currencies to take a trade advantage.

Key Quotes

“The implication is that Trump would prefer a weaker USD and certainly might come out and comment against broad further strength in the USD should it occur.”

“It is far from clear that these types of comments would have any lasting impact on the exchange rate.  If Trump and the Republican-led Congress succeed in delivering a corporate tax reform with a BAT, the USD is more likely to rise.”

“However, Trump’s comments on currencies and trade are part of a broader theme of protectionism that tends to threaten confidence in global growth.  At times this might seem to support alternative safe havens like gold and JPY.”

“Risk aversion has been more atmospheric than apparent in broader market developments.  It appears to be seen in some reduction in USD long positions taken initially on hopes of growth-orientated Trump policies. However, emerging market, commodity prices, and currencies have been buoyant, tending to ignore risk factors and respond to evidence of improving global economic growth.”

“At the time of the Abe visit, Trump appeared to soften his attitude towards both Japan and China, suggesting that he may approach trade relations with this two major trading partners in a more measured manner. This, combined with his comments on tax reform, allowed some rebound in the USD.  However, this was soon overshadowed by the controversy surrounding his former National Security Advisor.”