WHAT HAS DONALD TRUMP AIMED TO ACHIEVE WITH THE DOLLAR AND WHAT HAS TRANSPIRED DURING HIS FIRST YEAR IN OFFICE?
When Donald Trump’s first year in office began, no one imagined everything that would unfold: tumultuous markets moving erratically.
The markets were quite wild, by the way—especially the foreign exchange market—because there was significant interference from Donald Trump regarding the dollar's behavior. This stemmed from his constant announcements regarding tariffs—tariffs here, tariffs there—always with the aim of protecting the U.S. market; in other words, implementing protectionist measures. On one hand, this generated immense volatility in currency prices. On the other hand, there was a sense of uncertainty about what would happen to the markets due to Donald Trump's announcements.
But what is Donald Trump’s strategy? Is there some method behind all this supposed “madness”?
Nevertheless, amidst this uncertainty and chaos, Donald Trump has a clear vision, and there is a strategy behind it.
The reason is simple: to weaken the dollar through the media, at least in the short and medium term. Perhaps because, in the long run, that’s not what would actually happen. What is the background to this?
Donald Trump’s MAGA program is designed to protect American markets: labor, industry, and so on. For this reason, he has focused his speeches on attacking foreign markets. What is his goal? As I mentioned, to strengthen the labor market and increase foreign investment, while also boosting domestic investment by preventing large capital from fleeing abroad. He does this by threatening tariffs on anyone who dares to invest outside the United States.
A strong American market, as Donald Trump desires, has consequences: in a purely fundamentalist sense, we know that an increase in non-farm payrolls strengthens the dollar. A lower unemployment rate strengthens the dollar. An increase in price indices strengthens the dollar. These protectionist measures come with a side effect: a STRONG DOLLAR.
These measures would result in a perpetually stronger dollar. However, if Donald Trump wants more foreign investment and to retain domestic investment, what does he need? Not a strong dollar, but quite the opposite: a weak dollar. So, if he wants his plans to materialize, what card does he have left up his sleeve?
Exactly: attacking the Federal Reserve, specifically JEROME POWELL, the head of the Fed, to get him to lower interest rates. As we know, a reduction in interest rates leads to a weakening of the dollar. In this way, a demand for dollars balanced with a rate cut would maintain a currency equilibrium—perhaps neither too strong nor too weak. This would justify Donald Trump’s constant attacks on the Federal Reserve; given everything I’ve said, it would be the logic behind the madness.
Donald Trump knows this; he is a strategist, he just makes use of what he likes most: the media. And while he applies pressure, he doesn't go all the way. He demands that industry and investors stay in the U.S., but to achieve that, Donald Trump must also facilitate things through a weak dollar.
Jerome Powell has been a key player in this whole game because he has not succumbed to Donald Trump's orders. On the contrary, he has been a vigilant observer of the markets and has acted consistently, establishing monetary policies based on actual market behavior. He has acted prudently and conservatively regarding what the markets have shown; however, Donald Trump has wanted the Fed to adopt aggressive measures regarding interest rates.
On the other hand, in my opinion, the fundamental results haven't played much in favor of Donald Trump’s plans because, whether we like it or not, they have shown positive results compared to previous data. Furthermore, the labor market hasn't been conclusive one way or the other; we have seen a slight or very timid improvement in American employment without the result being, as I mentioned, definitive.
These two aspects are what Jerome Powell has been watching. Since there hasn't been a definitive favorable or unfavorable result for the American economy, his stance cannot be as radical as Donald Trump wants.
This has obviously forced the FED to be very conservative regarding rate cuts. Although they have been lowering them, as I said, it hasn't been in the manner Donald Trump would like. What worries me is that I see a lot of manipulation in the results of macroeconomic indicators.
FABIÁN VALENCIA FX
Trader y Gestor de cuentas
www.fabianvalencia.online
When Donald Trump’s first year in office began, no one imagined everything that would unfold: tumultuous markets moving erratically.
The markets were quite wild, by the way—especially the foreign exchange market—because there was significant interference from Donald Trump regarding the dollar's behavior. This stemmed from his constant announcements regarding tariffs—tariffs here, tariffs there—always with the aim of protecting the U.S. market; in other words, implementing protectionist measures. On one hand, this generated immense volatility in currency prices. On the other hand, there was a sense of uncertainty about what would happen to the markets due to Donald Trump's announcements.
But what is Donald Trump’s strategy? Is there some method behind all this supposed “madness”?
Nevertheless, amidst this uncertainty and chaos, Donald Trump has a clear vision, and there is a strategy behind it.
The reason is simple: to weaken the dollar through the media, at least in the short and medium term. Perhaps because, in the long run, that’s not what would actually happen. What is the background to this?
Donald Trump’s MAGA program is designed to protect American markets: labor, industry, and so on. For this reason, he has focused his speeches on attacking foreign markets. What is his goal? As I mentioned, to strengthen the labor market and increase foreign investment, while also boosting domestic investment by preventing large capital from fleeing abroad. He does this by threatening tariffs on anyone who dares to invest outside the United States.
A strong American market, as Donald Trump desires, has consequences: in a purely fundamentalist sense, we know that an increase in non-farm payrolls strengthens the dollar. A lower unemployment rate strengthens the dollar. An increase in price indices strengthens the dollar. These protectionist measures come with a side effect: a STRONG DOLLAR.
These measures would result in a perpetually stronger dollar. However, if Donald Trump wants more foreign investment and to retain domestic investment, what does he need? Not a strong dollar, but quite the opposite: a weak dollar. So, if he wants his plans to materialize, what card does he have left up his sleeve?
Exactly: attacking the Federal Reserve, specifically JEROME POWELL, the head of the Fed, to get him to lower interest rates. As we know, a reduction in interest rates leads to a weakening of the dollar. In this way, a demand for dollars balanced with a rate cut would maintain a currency equilibrium—perhaps neither too strong nor too weak. This would justify Donald Trump’s constant attacks on the Federal Reserve; given everything I’ve said, it would be the logic behind the madness.
Donald Trump knows this; he is a strategist, he just makes use of what he likes most: the media. And while he applies pressure, he doesn't go all the way. He demands that industry and investors stay in the U.S., but to achieve that, Donald Trump must also facilitate things through a weak dollar.
Jerome Powell has been a key player in this whole game because he has not succumbed to Donald Trump's orders. On the contrary, he has been a vigilant observer of the markets and has acted consistently, establishing monetary policies based on actual market behavior. He has acted prudently and conservatively regarding what the markets have shown; however, Donald Trump has wanted the Fed to adopt aggressive measures regarding interest rates.
On the other hand, in my opinion, the fundamental results haven't played much in favor of Donald Trump’s plans because, whether we like it or not, they have shown positive results compared to previous data. Furthermore, the labor market hasn't been conclusive one way or the other; we have seen a slight or very timid improvement in American employment without the result being, as I mentioned, definitive.
These two aspects are what Jerome Powell has been watching. Since there hasn't been a definitive favorable or unfavorable result for the American economy, his stance cannot be as radical as Donald Trump wants.
This has obviously forced the FED to be very conservative regarding rate cuts. Although they have been lowering them, as I said, it hasn't been in the manner Donald Trump would like. What worries me is that I see a lot of manipulation in the results of macroeconomic indicators.
FABIÁN VALENCIA FX
Trader y Gestor de cuentas
www.fabianvalencia.online
