Expected Trump tariffs to raise the dollar but there are no

In November, the ordinary wisdom of Wall Street in November was that the tariff plans of the elected President Donald Trump will increase the US dollar. Instead, when the tariffs are in place, the concerns of the approaching recession overcame any positive benefit for green circulation.

A ICE Dollar Index On Wednesday, up to 104.31 trades before Trump tariffs were presented. After the announcement, it fell and reached 101.27 on Thursday, 3% waved about 24 hours. Even with a modest rebound on Friday, the index finished in a week, and the dollar is now weaker than before the November presidential election.

“Reflecting on Trump’s tariffs will somehow hit the US economy, and this is not what investors have expected,” said Chris Turner, head of the world market in Ing. “Investors expected the tariffs to be bullish for the dollar and bad for the rest of the world. But I think the US economy was not in a strong enough position to take these maximum tariffs now.”

While Trump at different times spoke favorably about the strong and weak dollar, the traders clearly accepted their elections to the green address. Dollar index Sharply rallied after Trump’s victory On November 5, and then continued to grow over the next two months, shortly trading above 110 in mid -January.

Since then, the index has receded against the background of increasing signs of economic weakness in the United States, and as Trump’s trade policy is more aggressive than the Wall Rate deal.

Katie Criski, head of the ETF alternative strategy in Invesco, still hopes for “short-term pain, long-term income” from the results of the Trump administration’s economic plan, but says the market confidence has faltered.

“The currency reflects the health of the economy, and so I think we are very concerned now. We believe that Trump has a plan, but we do not finally know that this is a plan,” Kriski said.

Flight Security

Certainly, foreign currencies have not recently moved against the dollar.

Traditional currencies are safety like Japanese yen and Swiss franc saw some of the biggest profits. But more economically sensitive currencies like Australian dollar This is more closely linked to the goods, lost the position against the dollar, especially on Friday, which looked like a “more traditional risk day,” Turner said.

Safe flight in other asset classes also has a mechanical effect on the foreign exchange market. For example, drop in the US Treasury makes less attractive to foreign investors to hold US dollars or collecting interest, while the US dumping is likely to include foreign investors who move this distribution to domestic stocks by selling a green playground along the way.

A Euro He proved one exception from the risk trading, rising against a green lapel last week, although it is usually seen as a less safe game than the dollar. Crisis said he was growing optimism around a potential peace deal in Ukraine and promises more public expenses from countries such as Germany, helping to strengthen the euro.

“It was a bizarre that this new (Trump) administration actually helps Europe take its home in order, and these currencies look more attractive,” Criska said. Bet on Euro on Improving is one of the strategies used in Invesco DB US Dollar Index Bear Fund (UDN).

What’s next

Good news for investors is that the sharp step in the currency markets this week does not pose a direct threat to the economy or financial system. Amol Dhargalkar, head of the Chatham Financial Partner, said companies may look more aggressive at their currency risk in the following months, but corporations usually do it conservatively, which means that this week should not be serious.

“Their main goal is not to accept the opinion for the most part.

Although there may be a hedge fund that was on the wrong side of the dollar movement, the foreign exchange market is also extremely currency, deep and actively traded around the world, that is, it should withstand 3% of dollars without a particular problem.

“It’s good within which market can digest,” said Ken Miller, a portfolio manager Simplify the ETF Currency Strategy (Foxy) And the head of the trade company. Last week, he compared it profitable with the situation that the 2008 currency markets face. “It was a completely different animal in the fact that banks were at risk and counterparties were at risk. I don’t feel it here.”

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