Trump has been a dead-weight on the USD - AmpGFX

Analysts at Amplifying Global FX Capital point out that the USD performance has been broadly very lackluster this year as broad dollar indices against major and developed currencies have unwound all of their post-Trump election rally in Nov/Dec last year.

Key Quotes

“The fall in US yields and the USD may reflect growing unease with the Trump Presidency.  The testimony by former (sacked) FBI Director Comey on Thursday this week may be lifting anxiety.”

“The criticism of Trump by several US business leaders and internationally after he pulled out of the Paris Climate Agreement may also have added to a broad lack of confidence in the policy direction in the USA.”

“Economic nationalism (Pittsburg before Paris) may have some features that support growth in the USA and the USD.  However, the market may be thinking more about the US isolating itself from the rest of the world, encouraging other countries to pursue a form of globalization that excludes the USA.  Even big US companies may attempt to distance themselves from Trump’s America and align their business with foreign trends.”

“Trump’s style, designed to appeal to the old-technology manufacturing American rust-belt, is antagonizing the dynamic high-tech, green-friendly sectors, and other nation’s political and business communities.”

“A number of foreign governments have announced big individual investments in the USA to impress Trump on official visits, but this appears aimed at appeasing Trump to avoid possible trade restrictions rather than a genuine sign of cooperation and deepening economic ties.”

“The US economy has continued to grow in spite of the Trump whirlwind.  US consumer confidence and small business confidence still appears to have been boosted by the Trump growth agenda,  but US financial markets (USD and bond yields) suggest investors are far less convinced that he will deliver any positive reforms.  Some may consider stronger US equities as a sign of confidence in Trump, but global equities are rallying and US markets are just along for the ride.”

“If Trump and Republicans can generate momentum in tax reform there is considerable scope for a rebound in the USD and US yields. But there is also a risk that Congress is distracted by the approach of the debt-ceiling limits and the need for a new spending resolution bill from September; not to mention the ongoing investigation into Russia’s election meddling.”

“Economic momentum remains intact.   GDP is set to rebound in Q2, the labor market is tightening, and gradual Fed tightening remains on track.  This may not be the time to sell the USD after its broad-based fall this year.  But Trump is currently acting as a dead-weight on the USD. The US economy must continue to prove its mettle to ensure the USD does not continue to drop.”