News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Oil - US Crude
Bullish
Wall Street
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bearish
GBP/USD
Bearish
USD/JPY
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • There’s a strong correlation between interest rates and forex trading. Forex is ruled by many variables, but the interest rate of the currency is the fundamental factor that prevails above them all. Learn how interest rates impact currency markets here: https://t.co/J0EPMD2Cfi https://t.co/ZDuee58Abe
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/BdgFmkRxVw https://t.co/niJL2W2yXV
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/Yl9vM7kO6a https://t.co/0rNbbrd58e
  • Traders utilize varying time frames to speculate in the forex market. The two most common are long- and short-term-time frames which transmits through to trend and trigger charts. Learn more about time-frame analysis here: https://t.co/9S5tXIs3SX https://t.co/zPzJAxBJxt
  • Emotions are often a key driving force behind FOMO. If left unchecked, they can lead traders to neglect trading plans and exceed comfortable levels of risk. Read on and get your emotions in check here: https://t.co/eILWbFgHRE https://t.co/uf6KEYTes5
  • There are three major forex trading sessions which comprise the 24-hour market: the London session, the US session and the Asian session. Learn about the characteristics of each session here: https://t.co/reRmDe1Ksp https://t.co/gRjdVfbg66
  • Implementing a trading checklist is a vital part of the trading process because it helps traders to stay disciplined, stick to the trading plan, and builds confidence. Learn how to stick to the plan, stay disciplined, and use a checklist here: https://t.co/SQUCCYRCIk https://t.co/mLLGqYUygY
  • Use this technical analysis pattern recognition skills test to sharpen your knowledge: https://t.co/Qgz89PTxnu https://t.co/HUYJzEkYiT
  • #Gold prices put in a major breakout last month and, so far, buyers have held the line. But a really big Fed meeting is on the calendar for this week. Can Gold bulls hold? Get your market update from @JStanleyFX here: https://t.co/NGRTSfceOW https://t.co/QkSUORIQE2
  • Struggling to define key levels? Floor-Trader Pivots assist traders in identifying areas in a chart where price is likely to approach and can be used to set appropriate targets, while effectively managing risk. Learn how to use this indicator here: https://t.co/Ye4m1FMKUW https://t.co/PHK2sqB1jV
Would the Trump Administration Resort to Selling the Dollar?

Would the Trump Administration Resort to Selling the Dollar?

John Kicklighter, Chief Strategist

Talking Points:

  • Historically, the US has held a 'strong dollar' policy, but the Trump administration has shown willingness to break convention
  • Trade wars are being pursued to force trade negotiations, yet the lack of intended impact raises risk of the more extreme
  • Selling the dollar would have complicated results that would likely incur a permanent discount for the Greenback

What makes for a 'great' trader? Strategy is important but there are many ways we can analyze to good trades. The most important limitations and advances are found in our own psychology. Download the DailyFX Building Confidence in Trading and Traits of Successful Traders guides to learn how to set your course from the beginning.

A History of a 'Strong Dollar' Policy

Historically, the United States has maintained an official stance that it favors a strong Dollar. There is an agenda behind this stance beyond the assumption that the world's largest economy simply wants to be charitable to other countries that depend more heavily on their exports. Through a strong currency, there is a fortification in both the appeal of the country's assets and its general credit quality. That in turn promotes stability in the US Dollar which fosters a view that the currency represents a safe haven in times of turbulence, a reserve for global stability and an international medium for transaction that would otherwise be complicated by unreliable conversions. These various roles have driven the Greenback to its current position as the undisputed benchmark of the world. Yet, this position of dominance is not guaranteed. The US currency itself took over from the Pound around the first and second World Wars. Should the use of the Dollar dwindle, the side effects will evolve slowly but their influence would be systemic. The position of economic dominance, unprecedented influence over global affairs and the 'dividend' earned through its financial markets by virtue of its weight could slowly evaporate. This would be a costly sacrifice, but the current administration has made clear that few norms are so sacred as to preclude their use to pressure favorable results in negotiations.

Would the Trump Administration Resort to Selling the Dollar?

An Administration Willing to Break from Convention

At this point, it should be clear that the Trump administration is willing to pursue the unorthodox in policy in order to achieve its stated goals. Having embarked on a trade war, the government has broken from numerous administrations before it whereby the pursuit of global growth through trade offset most concerns over questionable trade practices by counterparts. It is this path that makes the shift to an outright currency engagement a more probable scenario. It is clear from the rapid escalation of tariffs against China - the most flagrant trade peer to flout the rules - that the United States is looking to force a favorable negotiation. Thus far, the Trump administration has implemented a virtual global import tax on global imports of steel and aluminum along with a targeted $34 billion in intellectual property targeted tariffs against China specifically. A further $16 billion in duties against this trade giant are due to kick in later this month. They have further added to the effort with a threat by suggesting $200 billion and even the entirety of Chinese imports into the country, and yet China defiantly meets the efforts with action or threat of like-for-like retaliation. That is not the supplication the US is seeking for negotiations. As China runs out of US imports to threaten, the effort is more likely to turn to even more unorthodox retaliation. That will likely lead the US to ramp up the pressure beyond simple taxes on imported goods. What's more, US President Trump has already accused China of pursuing current manipulation for an unfair advantage. That makes it an appealing option for a leader who tends to use policies he perceives being used against the United States against the instigator.

Would the Trump Administration Resort to Selling the Dollar?

What Happens if the US Uses Devaluation as a Tool

If the world's most liquid currency, dominant means for transaction and primary reserve were to suddenly find itself prone to the whims of political intent; the implications for the global financial system would be troubling. For the US currency specifically, the effort would almost certainly result in a significant depreciation. In the short-term that would be a move owing to the 'success' of the government's policy. However, beyond that initial slide, the pressure would become a global charge. Global investors who invested in US assets in large part for the relatively high rate of returns to be found following the Fed's gradual policy tightening and the steady clip of growth will face a sudden risk in the form of volatile exchange rate risk. Deeper pools of capital holding US reserves (central banks, wealth funds, pensions, etc) will be prompted to accelerate plans to diversify away from heavy concentration in top credit US assets. The intent to balance heavy exposure to US Treasuries and thereby the US economy and financial system has been in place since the Great Financial Crisis when the fallout from the subprime housing market seemed to sink capital markets around the world. Yet, making such a systemic shift in a world of distortionary monetary policy was not easy. That said, any reservations these groups may have to make a change would be quickly superseded by such a currency war overture. This would be a permanent discount for the Dollar (not just a pullback to eventually rebound) and the resting level of volatility behind the currency would naturally settle much higher. We discuss the current 'strong Dollar' policy in the US, the possible motivations for abandoning it and the implications for the market in this Quick Take Video.

Would the Trump Administration Resort to Selling the Dollar?

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES