There have been many cases in the history of the US when the actions of the country’s leader have seriously affected the direction of the economy. Although at the given moment the national currency is on its rise, performing effectively after the economic crisis caused by the pandemic lockdown, the situation may change and the main reason for this could be Donald Trump’s foolish behavior. The US presidential election was a no less important event of the year for the whole world than the COVID-19 pandemic. The results of the election can actually change the worldwide political conditions and this is why so many people are worried about the way the president behaves.
Everybody knew that if there were issues with the elections, President Trump would take immediate legal actions, but these actions will probably reflect directly on the US financial sector and the impact won’t be favorable. In fact, as it seems, for now, Trump is not going to accept the fact that he is no longer the president of the US. He doesn’t consider Joe Biden as a new president and constantly declares himself as a winner of the elections. According to the New York Times, this is why he’s on his way to joining a club of truculent leaders, who don’t accept the results of the election and claim to be leaders, regardless of what voters decide.
Will Trump’s actions affect the USD?
The last time an American president lost a re-election bid was back in 1992 when George H.W. Bush lost against Democratic Bill Clinton in the post-Cold War political climate. However, he declared Clinton as a new president and conceded immediately, saying he respected the vote of the American people. But Trump seems to have chosen a different course believing that there were serious issues with the way the elections were conducted.
Probably, Trump’s comments about election rigging and about Biden making conspiracies against him will severely damage the USD’s strength. The weak dollar will have a serious influence on every single sector of the country. Specifically, it could cause imports to be more expensive, the unemployment rate to increase, as well as resulting in market fluctuations, changing interest rate policies, and also, changing foreign trading policies.
Influence on the FX and stock markets
A weaker dollar is not necessarily good news for investors, but traders in the foreign exchange industry can actually see some advantages. It’s especially the case with so-called day traders. They are usually very sensitive about current economic trends. But if you look at how currency day trading works, you will easily believe that every trader who is interested in the higher stock prices can have some advantages from the weaker dollar. These day-traders take part in driving stock prices when the dollar weakens. In fact, day-trading is an attractive option for everybody who is looking for a fast trading strategy to raise funds. With this method, they can identify more than one opportunity in a day and receive large payouts.
However, unlike them, other investors prefer to take a longer-term view and analyze the reasons behind the fall in the value of the dollar. Sometimes it may be caused by the big levels of government debts or other problems in the US economy, but now as experts suggest, current confusion in US politics is the main reason why the dollar may weaken in the near future. The problems of the US dollar could affect not only the forex market but also the whole course of the economics of the country. Besides, it will have a serious impact on the global trading conditions because as a result of decreasing the value of USD some countries may start to devalue their currency to make themselves more competitive economically.
Needless to say that the stock market will be also influenced by the fluctuation of the dollar, as the market value of the USD usually has an impact on every sector of the economy. A weaker dollar will probably cause stock prices to rise. However, as the relationship between USD values and the stock market is not direct, we can’t say certainly whether a weak dollar is good news or bad news for investors.
Does Trump try to deliberately weaken the dollar?
It’s not the first time when Trump’s course caused a threat to the national currency. According to CNBC, he has previously taken some actions to weaken the dollar. Some experts believe that the Trump Administration deliberately tried to increase the chances of damaging the USD’s strength because unlike the previous four administrations, they didn’t care to maintain the strong dollar policy at all. This was mostly due to plans on increasing American exports to different countries.
Trump actually thought that the weaker US dollar is better for the economy and this can have some reasons. First of all, if the USD is weaker compared to other currencies then foreign countries are more likely to buy more US goods. This is important for increasing US manufacturing and trading. As he said, he wanted a dollar that would help the country to do business with other nations.
However, his current actions are less likely to do something with weakening the dollar deliberately. It could be a sort of positive side effect that could indeed help the US economy in the future. But currently, it’s about having fair elections and actual results rather than deliberately hurt the country’s economy.