Where is the Trump dollar? – Commerzbank
|After US President Joe Biden withdrew his candidacy for re-election, there should be an effect on the currency market. After all, everyone says that speculative market participants had positioned themselves in line with the effects that are supposedly to be expected if Donald Trump becomes US president again. And, since the chances of almost every Democrat candidate are likely to be higher than those of the apparently mentally unfit Biden, there should be a partial reversal of the Trump trade today. But that’s not the case, Commerzbank’s FX strategist Ulrich Leuchtmann notes.
USD doesn’t react much to Biden stepping down
“The Dollar Index (DXY) opened this morning in Asia with only slight twitches, but is essentially trading at the same levels as on Friday. The yields on US government bonds are also only marginally changed. And even the Mexican peso – the “mother of all Trump trades” – is trading more or less where it ended last week. Why?”
“The fact that Biden would withdraw his candidacy was already being whispered on Friday. The timing of his communication is likely to have only very marginal effects on the outcome of the election in November. And thus, the market reaction this morning should also be minimal. I'm not sure whether the talk about the Trump trade has any substance or is just another urban legend.”
“The foreseeable effects of a Trump presidency on the USD exchange rates will depend on the Fed. Or rather, on how far it is under the thumb of the White House and how far it can maintain its independence. That is not clear. Therefore, I strongly advocate being prepared for anything. But I don't see what direction an alleged Trump trade should point in on the currency market.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.