Market News & Analysis
Trump Hates the Strong Dollar, but Buck Bulls LOVE Him
Matt Weller, CFA, CMT February 20, 2020 11:56 PM
In a classic “best house in a bad global neighborhood” trade, the US dollar is off to its best start to a year since 2015, rising against each of its major rivals year-to-date. While (relatively) strong economic data and safe haven demand amidst the coronavirus outbreak have certainly played a role in boosting the buck, an underappreciated driver may be the prospects for President Trump to get reelected.
As the US economy remains on solid footing and the impeachment inquiry fades, Trump’s approval rating is hitting its highest mark since first month of his presidency. Though he still lags behind nearly every modern US president on this measure, the trend is certainly heading in the right direction for the “Keep American Great” crowd. At the same time, possible rival and self-proclaimed “Democratic Socialist” Bernie Sanders is piling up delegates and looking increasingly likely to be the Democratic nominee, a development that punters seemingly believe bodes well for Trump’s reelection odds:
Source: Predictit, Bianco Research
When it comes to the greenback, President Trump continues to publicly condemn the strength in the US dollar and advocated for interest rate cuts from the Federal Reserve, but buck bulls don’t seem to mind. In recent weeks, the administration has floated a potential middle-class tax cut and large infrastructure package; developments like these and the Trump Administration’s general business-friendly policies have helped boost the value of US stocks and make the US more attractive to global wealth managers in general. As a result, Trump’s approval rating has shown a 70% correlation with the value of the US dollar index over the course of his presidency, according to research by TD Securities:
As we move toward the ides of March and the general US public starts to tune in, political headlines will increasingly suck the proverbial air out of the room. If those headlines increasingly point to Trump winning reelection, the US dollar could build on its recent gains, with the widely-watched US dollar index potentially breaking back above 100.00 and perhaps challenging 2017’s 17-year high near 103.50:
Source: TradingView, GAIN Capital
Traders have always been a forward-looking bunch, and with a little more than eight months to go until the US Presidential election, the evidence suggests that they believe another four years of President Trump could keep the US dollar great as well!
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.