Home Trump Wins: What’s Now For The Dollar? – Deutsche Bank

Trump Wins: What’s Now For The Dollar? – Deutsche Bank

Donald Trump is the next president of the US. The shock has already  stirred markets. The team at Deutsche Bank  outlines what’s next for the US dollar:

Here is their view, courtesy of eFXnews:

It will take a very long time to understand the implications of a Trump presidency.

Big picture, it re-enforces the world’s shift away from globalization.

In the short-term, the market will likely focus on the following three markers:

Trump rhetoric.  Does the potential president-elect sound “presidential” today? Are there signs of moderation in policy, particularly its most controversial aspects on foreign policy? How quickly do we find out about presidential appointments, to the post of Treasury secretary in particular, and are they credible?

Data.  There is an unambiguous rise in policy uncertainty and the key question is how much does this impact near-term US and global growth. Both the Fed and the markets will be closely scrutinizing upcoming releases, but we will have to wait until the week of November 21st for the first business confidence surveys (Markit PMI).

Chair Yellen. It is reasonable to assume that the Fed may put December rate hike preparations on hold until more clarity is reached on the data, but even more importantly the market will be looking for confirmation that Chair Yellen will not resign. Trump has been particularly critical of her term so policy continuity will be particularly important.

As far as the dollar goes, there is a clear tension between the negative impact of lower Fed expectations, higher uncertainty and risk premium on US assets compared to the positive implications of Trump’s fiscal and corporate tax programs on growth and corporate tax repatriation.  We view the impact as unambiguously negative for EM currencies

For developed market currencies the tension between lower Fed expectations near-term but a more positive fiscal story  medium-term is balanced enough to keep our forecasts and medium-term dollar bullish outlook unchanged. The one exception to our dollar positive forecasts is USD/JPY,  where we view both the Asian geopolitical and risk-aversion impact as sufficiently  strong to re-enforce our conviction on our year-end target of  94.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.