Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a1047820

The Accumulator: Trump takes dollar down with him

Bond fund managers at M&G have noticed a striking correlation between Trump's popularity and the dollar: both are going down.

 
The Accumulator: Trump takes dollar down with him

Bond fund managers at M&G have noticed a striking correlation between Trump and the foreign exchange markets: as the US president's popularity falls, so does the dollar.

Both have been falling steeply in recent months. Trump's approval rating is now languishing at 39.7%, down from 44.3% at the start of the year, while the dollar has fallen around 12% from a January high against a basket of currencies. As our exclusive Accumulator data table shows, it is down 5.7% even against the weak pound this year, and has fallen 12.6% against a resurgent euro.

It's perhaps no surprise that the two are intertwined. The dollar and the US stock market both rallied strongly following Trump's election on hopes his tax-cutting and infrastructure spending plans would accelerate economic growth.

That trend has gone into reverse this year, however, as investors begin to doubt Trump will be able to deliver on his plans.

Having failed to repeal Obamacare, which would have unleashed some of the savings needed to fund tax cuts, the chances of fiscal reform are limited.

And Trump has more immediate problems to deal with in the form of a potential government shutdown. He struck a deal with the Democrats this week to extend the US debt ceiling, averting a shutdown and meaning the government will be able to deliver aid to hurricane Harvey victims.

But the extension, until 15 December, is likely to have postponed rather than solved the problem. That means the almost unthinkable situation of the US defaulting on its debt cannot be ruled out.

In previous government shutdowns related to the debt ceiling, US governments have treated the servicing of debt as a priority. But the same might not be assumed of Trump's administration.

'Under president Trump it is difficult to see payments to the many foreign creditors (such as China!) being given priority while the average American has to wait for their social benefits,' said Christopher Balz at Commerzbank.

That's not a recipe for the dollar mounting a recovery any time soon. Trump was repeatedly railing against the dollar's strength at the start of the year, even claiming in April that the rally was 'partially my fault because people have confidence in me', as M&G's Bond Vigilantes have highlighted. He's been granted his wish, though not in the way he would have planned.

You can access the Accumulator table here.

3 comments so far. Why not have your say?

Micawber

Sep 09, 2017 at 07:27

Daniel, the link at the end leads to the bond vigilantes Twitter page, not the Accumulator. Please get it fixed. Thanks.

report this

Stephen B.

Sep 10, 2017 at 16:12

http://citywire.co.uk/Publications/WEB_Resources/Accumulator/Accumulator_080917.pdf

report this

Daniel Grote - Citywire

Sep 14, 2017 at 16:05

Really sorry about the error with the link, I have belatedly fixed it.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts


In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

More about this:

What others are saying

Archive

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Read more...

Card Factory slump hits Woodford and Barnett

by Daniel Grote on Sep 26, 2017 at 16:44

Sorry, this link is not
quite ready yet