Unlock the editor of the editor for free
FT’s editor, Roula Khalaf, chooses your favorite story this week.
“Trump Trade” has been counterproductive by betting on stronger dollars and higher bond yields.
The US currency has slipped and has confused the expectation of a wide range of investors that President Donald Trump’s trade tariffs and tax reduction plans will maintain inflation and interest rates.
“Despite the feeling, if it is really expanded until the beginning of this year, [Trump] Jerry Minier, the co -head of the G10 Forex Trading of the Barclays, said. “People will be reevaluated.”
Since the president’s tariffs are less aggressive than many people fear, investors have withdrew partially from popular Trump transactions. Many, however, also worryed that uncertainty caused by the stop start trade war began to hurt the US economy and weakened the optimistic market response to Trump’s election in November.
The “average menu” of popular transactions, such as betting on Euro and China, has not been rewarded this year, Minier said. “I need a reason for the dollar [rally] In order to continue to expand, at least now they have disappeared. ”
Trump’s inflation policy will help to reduce interest rates to Federal Reserve Banks, reduce the growth of US trading partners, and help leading a big rally in dollars. The US currency increased 8 % for fellow baskets from the end of September to the end of the year.
According to the analysis of CME CURRENCY FUTURES CONTRACTS, asset managers took the dollar in December for the first time since 2017. But by this year, US currencies have fallen 0.2 %.
The higher the inflation, the more it helped to increase the return on the 10 -year financials, which helped to move to 4.8 %in the highest January, which is the highest since late 2023.
But as the market focus turned into an inflation to the fear that the buoyancy economy in the US could be shaken under a new president, they fell to 4.53 %.
Torsten Slok, a senior economist of investor Apollo, said, “There is a fundamental fear that growth can be slow.”
David Kelly, a global strategist at JPMORGAN Asset Management, said, “The bond market is afraid of the fear that the trade war can cause a slightly higher inflation and slow American growth or global growth.”
This month, Trump withdrew from a threat to impose tariffs on Mexico and Canada for 11 hours, and the two countries allowed delays on the 30th. However, he said he had made 10 %additional import tariffs in China, and on Friday, the president said he could hit Japan with new charges to deal with the trade deficit as the most important allies of the United States in the Indian-Pacific Ocean.
We also announced a 25 %tariff plan for steel and aluminum imports.
The emerging market, which is expected to be a special victim of the trade war and more powerful dollars, has ignored expectations in recent weeks after some calls have reached a low lowest level in recent weeks.
Since Trump’s second term began last month, Chile Pesos has increased by more than 3 %, while Colombian Pesos and Brazilian Real have increased more than 6 % for green bags.
Bank of America’s strategists have changed to be positive for emerging markets since 1985, with excessive belief that betting on the highest strongest dollars in practical effective exchange rates is excessively famous.
“This is a very extreme positioning, and a lot of tariff noise is already priced.”
“Of course it can’t be worse, but in the last few weeks we have set a significant price.”
Investors say the Central Bank of emerging markets has a range of borrowings to support economic growth after the aggressive rate has risen to solve inflation in recent years. Mexico, the Czech Republic and India all reduced interest rates last week.
The actual interest rates adjusted to the inflation are also higher in most of the developed countries than in the United States, making it more profitable to borrow dollars and invest in emerging markets.
A emerging market fund manager who just returned from Brazil said, “How to slice or injection is very cheap. Asset at an affordable price.
