US Dollar Still under Trump’s Policy Actions

January 20, America saw the official ceremony at which Donald Trump took office as President.

Despite expectations, the implementation of programs for fiscal stimulation and the conduct of infrastructure reform remained unaffected. However, if tax reforms are introduced then investors from the rest of the world, attracted by tax breaks of up to 85% may trigger the return of their capital, a sum of almost USD 1,000,000,000,000. And around a third of that capital will go as FOREX. This is what investors worldwide were expecting.

Therefore, it could be said that the President’s inaugural speech disappointed investors. The financial markets were not slow to react – the week’s trading commenced with a sharp weakening of the US dollar against all assets.

So far, the lack of intelligible rhetoric from this most unpredictable President makes no mention of a global change in the flow of investments. There are those who think that Trump’s cabinet will decide matters in sequence. For now, the key issue is the political battle, which did not end after the elections – according to major news sources, meetings of those opposed to the new President were attended by more than 2 million people.  It would be logical to assume that the current government will have to wait until this wave of meetings and protests is over before implementing any further strategies. Then it will be time for official meetings with representatives of the great world powers:

• on 27 January, Trump had a meeting with Theresa May, prime minister of the United Kingdom (which, against a backdrop of the threat of the cancellation of the TPP agreement, may have a significant influence on the world economy);
• and, on 31 January, there will be a meeting with the president of Mexico.

Based on the current market situation, it can be assumed that the weakening of the dollar is a temporary phenomenon. It could be said that Donald Trump has made a “lyric pause” to close down some bureaucratic issues and this pause will not last long. The financial markets need a “shake-up” and Trump understands this very well. The prospect of a strong dollar is still very possible.

Commentary by Andrew Masters, a FIBO Group analyst.