The dollar has lost 10.48% of its value compared to other currencies in the DXY index of year so far. Currencies usually move against each other in groups of percent, so this is a relatively massive event. The dollar had dropped by 0.55% this morning at the time of writing.
And – you guessed it – the person responsible is President Donald Trump.
In the last 24 hours he has plunged the dollar by another 0.3%. After the Financial Timesafter The Wall Street Journal reported This Trump is considering naming a replacement for the US chairman of the Federal Reserve, Jerome Powell, in September. Powell’s tenure has increased in May – a named replacement that is evident in the background would be greatly undermined.
This is a problem for investors who see Powell as a serious, careful economist who works regardless of Trump’s political wishes.
Convera’s Antonio Ruggiero told the customer this morning: “The fleeting support for the Greenback, which was born from geopolitical tensions and the traditional complaint of Safe-Haven.”
Trump hates Powell because Powell lowered interest rates. In a series of contributions about the truth, social, Trump repeatedly insulted Powell and named him name. Powell is a “very stupid, persistent person,” said Trump’s latest contribution. “We will pay for his incompetence for many years.”
Powell is in a narrow point because the US inflation rate is still over 3%. In fact, Trump’s tariff policy is generally considered inflationary because she increases the price of imported goods. The target rate of the Fed is 2%. If Powell lowers the rates (currently at 4.25%), this would theoretically make inflation worse.
It is likely that Trump would like to have the assurance that his next choice for the Fed would reduce interest rates. The decline in the dollar is therefore a sign that investors are nervous, that the US money policy may end in the hands of someone who does not understand or is about how inflation works.
This could set up an extraordinary conflict between the Fed Chairman and the rest of the Federal Open Market Committee, which defines the target interest rate, as can be seen from a note published by UBS analyst Paul Donovan this morning.
“Only the convention prevents the FED from overrulse the chairman – an obvious political representative can be ignored by the FOMC. The greatest threat to the independence of politics would be someone who was not an obvious political puppet, but was influenced by Trump’s instructions,” he said.
And then there is the bond market. The FT reported This morning investors flee from a long dated US bonds because they fear that Trumps will add more federal debt “a big beautiful calculation” than the US economy can support.
Net drains from long-dated bonds reached $ 11 billion in height Q2“The fastest interest rate since the height of the Covid 19 pandemic five years ago when the increasing debt burden of America affects the attractiveness of one of the most important markets in the world,” reported the paper.
The bond market supports the value of the dollar. When bond prices fall, the USD will follow.
“It is a symptom for a much bigger problem. There are a lot of concerns in Germany and the foreign investor community to have the long end of the treasure curve,” said Bill Campbell from Doubleline to the FT.
Shares now ignore all of this drama. The S&P 500 seems to make another attack on the all -time high of 6,144.15 today. S&P 500 -Futures tackled by 0.36%at the time of writing.
Here is a snapshot of the campaign in front of the opening bell in New York:
- The S&P 500 Closed last night with 6,092.
- S&P Futures had increased by 0.36% this morning.
- Stoxx Europa 600 had increased by 0.23% in early trade.
- Bitcoin Was over 107,000 US dollars this morning.
- Japan Nikkei 225 had increased by 1.65%.
- India Nifty 50 had increased by 1%.
- China, Hong Kong, And South KoreaThe main indices were all slightly down.
