Does Trump drowned the dollar and what does this mean to the euro?

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US dollar And their relationship to Pond’s performance has given a lot to think about economists. The dollar indexIt measures the value of the green ticket compared to six currencies, More than 8 % has decreased since January. Last month, it reached its lowest level in three years.

At the same time, American bond returns have increased, challenging the usual economic guideline. In times of uncertainty, investors usually go to the Mass American treasury bondsWho are considered a safe place to stop their money. As a result, bond performance usually falls When stock markets collapseY The dollar usually rises. During the 2008 and 2020 crises, for example, the value of the green ticket increased.

In the context of the unconventional economic policies undertaken by US President Donald Trump, the markets are now making more wrongly. The recent increase in bond yields, accompanied by a decrease in dollar, indicates that investors are Flee from American originsLoss of faith in treasure bonds.

For those who are familiar with the United Kingdom, it maintains last month the effects of the bond crisis caused by the former Prime Minister Liz Trem EN 2022. A recovery in the performance of the British doctrine after a controversial economic package, along with a The value of the minced balanceThe government is forced to retreat.

An uncomfortable increase in debt service costs

The high revenues of bonds means that the United States government must pay more interests for borrowed debts, which limits spending. The increase in debt service costs is not particularly proven, because the United States has already registered a A high budget deficit. For the year 2024, this number reaches some $ 1.8 billionThe third largest federal deficit in the history of the United States, equivalent to 6.4 % of GDP. It can contribute to a recovery in the price of bonds in Trump’s decision Stop “mutual” customs tariffs for 90 days In early April.

Decrease It happens after the currency rose About the presidential elections last year. The growth in the United States was strong, and when Trump won the elections, many expected him to continue to enhance economic expansion. On the other hand, predictions a The recovery of inflation – He was suspended by Trump’s promise to impose a tariff- and they also raised the dollar. The perspective of high interest rates and profitability reinforced the demand for currency by foreign investors.

Alarm signals for investors

“The markets are increasingly tense about the credibility of American policy, as shown in increasing the installment required by investors to own it American treasury bonds“In addition to the declining pressure on the US dollar,” said Rangiv Man, chief wallet manager in Allianzage, to the eurono.

In particular, Managed Trump’s pressure on a president Federal Reserve, Jerome PowellAs a cause of anxiety. “Although Powell does not end until May 2026 and Trump does not have the constitutional authority to reject Powell before the end of his mandate, the danger is that the Federal Reserve is more political in the coming years, Correlation of credibility of monetary policy “Trust in American assets,” said Man.

The discounts are added to the factors of destabilization

In addition to Federal reserve threatsThere are other indicators related to investors, which indicates the rupture of the financial and political system in the United States. he Doug office expensessuddenly External aid discountsThe withdrawal of international treaties, the perspective of canceling financial restrictions and Trump’s contempt for approval of Congress is just some signs The market confidence is immersedAlong with an imminent stagnation perspective.

In early April, Congress also agreed to a budget decision to reduce taxes significantly The US deficit will increase significantlyDuring the next decade. Despite the low demand for American procedures and bonds, experts claim that it is still unlikely to be the United States Debt obligations.

The dollar excels

The dollar unified its situation The global reserve currency in 1944At the Bretton Woods conference, an event that also led to Establishing the International Monetary Fund and the World Bank. Instead of linking global currencies to gold, delegates decided to link them to dollars. This means that the green ticket is now the dominant currency in International transactions And that central banks around the world keep them in large quantities. Since the reservation of the dollar enhances the demand, this system benefits the United States, because it reduces the costs of debt and inflates the prices of assets called the dollar.

The United States is allowed to preserve it Commercial and financial deficit “EURONEWS” Vesso Ioannidou, professor of finance at Bayes College of Business in London, said, the constant without immediate pressure, and isolates its economy for the usual restrictions on the increasing financial lever, “said” Euronews “Fiso IOANNIDOU, Professor of Finance at the Bus Business College in London. The dollar excels This also means that American sanctions against foreign countries It can be particularly effective.

The stability of the green ticket affects prices

According to Brend Kimma, a professor of economics at Monster University, the status of the green ticket “also benefits American producers.” Capital imports Useful interest rates are low In the United States and the generation of additional investments, in turn stimulates Growth prospects The long term of the American economy. In addition, the repair of US dollars to many internationally marketing goods provides coverage costs and currency transfer to American companies. “

However, there are those who believe that the strength of the dollar is wandering in the American industrial industry, an opinion that President Trump and Vice President JD Vance. When the green ticket is strongThis means that American products become relatively more expensive for foreign customers and foreign products that become cheaper for buyers in the United States. This is one of the reasons for this The great American trade deficit With other countries.

New era?

While Trump is undermining the dollar, it is difficult to see a competitor that can resolve the green ticket like Global reserve currency. The Swiss Franco, the Chinese yuan, or the Japanese yen enjoy its attractive characteristics, although it lacks the deep capital markets and the stability of the dollar.

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“We already have a larger interest than investors of assets called the euro,” he said. Valdes Dombrovscis, Commissioner of Economy in the European UnionAt the International Monetary Fund meeting, the New York Times cited. “We see that our stability, the ability to predict and respect the rule of law already appears to be a strong point.”

The euro won again Investor confidence

Since the 2009 Dion crisis, the euro got again Investor confidence. The European Central Bank is now playing a more active role in supporting economies through bond purchase programs, and the European Union has shown its willingness to support member states in difficulties. The last event that encouraged investors is a promise Germany To issue An additional 1 billion euros in public debt.

The incentive will enhance Eurozona EconomyDuring the filming of the demand for bonds, it is considered an active shelter. Nevertheless, the euro still has a long way. The one -capital market that allows money to cross the European borders easily is not a reality, and will require organizational coordination. In addition, some of the highly debt member states continue Disable the financial gravity of the bloc As a whole.

US leadership withdrawal

“Abandoning the dollar is a theory, but it is very unlikely in the short term,” explains Vasso ioannidou. However, the last policy changes and US leadership withdrawal They are promoting other countries to reassess their exhibition. Many of the diverse are already to reduce risk. If it is preserved, this trend may gradually erode the dollar. “

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It does not seem that the era of the dollar will end soon, though Withdraw the investor. The imminent destination for the green ticket will be largely dependent on the decisions taken in the coming months of President Trump, and if some of them are opposed More destabilization policies.