The dollar evolves in step with political decisions, geopolitical tensions and the directions of the Fed. In“With pressure on rates, economic strategies and global uncertainties, the American currency remains at the heart of global financial balances. The markets, for their part, are moving forward in an unstable context where each signal can influence the trajectory of the dollar, affirms Jean-Paul Betbèze.
Easy answer: where Donald Trump wants him to go, which assumes he knows it and is able to lead it. By following his speeches and press conferences. Which is not always easy. We understand that it is especially sensitive to the Dow Jones, currently at 46,500, after a minimum of 45,200 on March 20 and 50,000 at the beginning of February following worries, or terror with the war in the Middle East.
A dollar influenced by political strategy
For Donald Trump, growth is linked to the stock market, and therefore to the wealth effect. Companies must be allowed to make higher profits, with fewer standards and taxes, which makes lower short-term interest rates necessary. Hence his permanent demands for reductions and his criticisms against Fed President Jerome Powell who does so late (too late Joe), despite the Paul Volcker prize for “public integrity” received on Saturday March 21. Hence also the nomination of Stephen Miran as governor, his legal attacks against Lisa Cook (for problematic loan requests) and his nomination of Kevin Warsh to succeed him at the end of his term in May, if he is confirmed by Congress, which is not self-evident in this maelstrom, given the support of senators.
It is essential to emphasize that this phenomenon does not call for a simplistic value judgment. Certain causes of the decline in the birth rate reflect positive developments. This is the case of increased autonomy for women, individual freedom or better qualifications for children. Other factors are more negative: economic uncertainty, social pressure or the time and resources needed to raise a child.
Stock market, interest rates and wealth effect
The Fed’s monetary policy is anything but clear, beyond the mechanical link that Donald Trump draws between falling rates, rising stock markets and strong growth. Given the actions he takes in all directions. Stopping immigration actually leads to almost full employment in the United States, with an unemployment rate of 4.4%, which can lead to wage inflation. Lowering rates to emphasize more abundant financing of AI companies through credit could fuel a bubble. Waging a war against an Iran that blocks the Strait of Hormuz could lead to a global oil and gas shock.
Not forgetting the surprise messages that Donald Trump constantly issues to reduce their effects on Monday morning, just before the markets open, by talking about fruitful peace talks that might not exist. The financial markets, with this President, must get used to extreme criticism and hyperbole. They will have to get used to bluffsprice manipulation and perhaps lies.
A Fed under pressure and uncertain decisions
In such a situation, we must remember Stephen Miran’s paper dating from November 2024, before the official presidency of Donald Trump: “ A User’s Guide to Restructuring the Global Trading System HAS”. “The source of economic imbalances lies in the overvaluation of the dollar… driven by the rigid demand for reserve assets.”
We will have understood that, for him, the dollar is structurally overvalued because it is seen as an umbrella, which undermines American competitiveness, particularly its industry. This is why he is proposing increases in customs tariffs and control of exchange rates to detect cases of undervaluation elsewhere. He also announces a measured decline in the dollar, with rate cuts. This is what happened, with the dollar going from $1.02 to the 1€ in January 2025 to $1.17 to the 1€ in June. Value that it kept for approximately a year.
Between inflation, growth and geopolitical tensions
What happens next, with the war in Iran, is obviously no longer the application of this “Miran plan”. But rather a geopolitical strategy with control of an important oil source, Iran, after Venezuela. We can also focus on the current war and the links with Israel. But we must not forget China, which links everything that happens between Iran, Venezuela, Greenland, stablecoinsthe direction of the Fed… and the dollar.
Under these conditions, the Fed will not move its rates and everything will be done to maintain the dollar, therefore purchases of stablecoins in dollars, aka Treasury bonds, at a time when the American budget deficit is widening even further. Chance ? “The dollar is the best currency in the world,” Donald Trump will soon say. The Strait of Hormuz has become the largest poker table in the world. “Carpet!” †Trump said, “All right! » said the Iranian official (no name). Liar poker is making progress. Who lies best? The markets are waiting and will wait, without moving too much.
