How Trump comments affect the Dollar Index and can we expect a USD turnaround?

Undoubtedly, President Trump comments have sparked a number of market movements over the past year, as he is in charge. One can not deny, the results are really impressive: the SP500 has risen by almost 38% at the moment and the absolute record is Dow Jones, which is 48.43% higher today. The results are mainly due to the weak dollar and the successful tax reform Trump has achieved.

Let's look at the loser in the past year - USD, and how the president's comments "influence" the green currency.

1. After the Trump's victory, USD headed for new peaks, with the Dollar Index (DXY) rising by over 8% by the end of 2016. This rising impulse was mainly due to the pro-American campaign that Trump led. During the campaign, Trump promised a strong economy and strong dollar policy. For this reason, traders pushed the Buy button and raised the dollar by over 8% in less than a quarter.

2. After the initial boom, USD fell to a short range. On January 13, Trump commented that "the dollar is already too expensive, and somewhere due to China, which deliberately keeps its currency inexpensive." Since then, the USD has gone down to its impairment.

3. On April 12, Trump, again commented on the strong dollar, claiming that he was partly responsible for this and that he would have to disappoint his voters. After this comment, the USD depreciated further, and by July 25 it traded nearly 7% lower.

4. On July 25, Trump commented on the strength of the dollar against the Wall Street Journal, this time the comments were mixed.

Taking into account Trump's comments and the market reaction, we can assume that after his last comment on Jan. 25 in Davos, we are likely to observe the reversal of the one-year downtrend.

"The dollar will become stronger and stronger, and I definitely want to see it," Trump said.

Adding the Fed's desire to raise the country's benchmark interest rate at least three times in 2018. the probability of a USD reversal becomes significant.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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