Opinions Joost Derks
Who is fighting Trump?
In just over a week and a half it will become clear who really has a chance to fight for the American presidency with Donald Trump later this year. The outcome of that battle will soon have a major impact on the exchange rate of the dollar.
Anyone who follows the political news a bit can almost think that the struggle within the Democratic party is already raging in full force. The ballots in several states and the televised debates — such as Thursday night in Las Vegas — are just preliminary shelling. The real battle will only start on Tuesday 3 March.
On this so-called Super Tuesday primaries are held in no fewer than fourteen states. The candidate who gets a lot of votes on this day has historically a very good chance of eventually winning the party battle. This year, Super Tuesday gets an extra charge. Then Michael Bloomberg joins the fight. The billionaire puts all his cards on this day. He missed all previous primaries.
We will know more on March 3rd
Four years ago, Hillary Clinton and Donald Trump were the big winners on Super Tuesday. After that, it took months before they finally received their nomination as presidential candidate. This time will be no different, as there is no real favourite.
Until a few weeks ago, that was former Vice President Joe Biden. In the first primaries, however, he clearly loses to Bernie Sanders and Pete Buttigieg. Newcomer Bloomberg looks set to be fishing in the same pond as Biden, while Elizabeth Warren may have sidelined herself with her harsh approach to business and the banking sector.
What if a Democrat wins?
How the dollar will react to a Democratic victory will depend entirely on which candidate will be standing with their hands in the air. The coin may take quite a beating in the unexpected event that Warren does win. It is committed to giving the domestic industry a boost by influencing the dollar exchange rate.
On the other hand, Biden and Bloomberg are outspoken proponents of free trade. If these candidates win, financial markets will have less to worry about about all kinds of trade conflicts and about weird dollar exchange rate antics.
What if Trump wins?
Trump wants nothing more than a weak dollar. A cheap currency strengthens the international competitive position of American business. Initially it worked: in 2017 the dollar took a big step back against other currencies. That changed when Trump tried to defend the interests of the United States by stoking the trade conflict with China.
Due to all the uncertainty, more and more parties sought the safety of the dollar. Since the beginning of 2018, that currency has increased in value by almost 10% in euros. If Trump wins, the political uncertainty will remain so that the dollar appreciation may continue. And that's exactly what Trump would rather not have.
Joost Derks
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