Trump’s dollar déjà vu: what an uncanny chart about the greenback shows about American exceptionalism

Donald Trump's presidency has left an indelible mark on the US economy, with one chart in particular showcasing an uncanny similarity between his two terms. The US Dollar Index, a key indicator of the greenback's strength, has been tracking the trajectory of Trump's presidency, and the latest data is eerily reminiscent of the past.

Background & Context

The US Dollar Index has been a barometer of the US economy's health, and its movements have significant implications for global trade and finance. The index has been closely watched by investors and economists alike, who have been tracking its performance during Trump's presidency. The latest data suggests that the dollar is breaking out above resistance near the 100 level, a move that could have significant implications for the US economy.

The dollar's movements are influenced by a complex array of factors, including interest rates, inflation expectations, and global trade dynamics. However, the latest chart suggests that there may be a more fundamental driver at play, one that has to do with the policy initiatives of the Trump administration.

Key Details

According to Adam Turnquist, LPL Financial's chief technical strategist, the dollar's trajectory during Trump's two terms is almost identical. The chart shows a sharp decline in the dollar's value, followed by a sustained climb above the 100 level. The move is eerily reminiscent of the past, with Turnquist noting that the percentages, trading-day counts, and shape of the moves are all remarkably similar.

Turnquist has been updating the chart every couple of months, and the latest data shows that the dollar has broken out above resistance near the 100 level. This move is significant, as it suggests that the dollar may be entering another sustained climb. The implications of this move are far-reaching, with potential consequences for global trade and finance.

One of the key differences between the two terms is the macro backdrop. In 2016, the Federal Reserve was still accommodative, and inflation was running well below target. In contrast, the current cycle is marked by elevated oil prices and a still-wrestling Fed with an inflation rate that refuses to return to 2%. Despite these differences, the dollar's movements have been remarkably similar.

What Experts Say

Turnquist's analysis suggests that the dollar's movements are driven by policy sentiment, rather than yield differentials. He notes that the Trump administration's policy initiatives have been pro-growth, and that this has led to a sustained climb in the dollar's value. This analysis has significant implications for the US economy, as it suggests that the dollar's movements may be driven by factors beyond the control of the Federal Reserve.

Turnquist's answer has two layers. The first is policy sentiment, with the Trump administration's pro-growth initiatives driving the dollar's movements. The second is the structural forces at play, with interest rates playing a role in both terms. However, Turnquist notes that the dominant force is growth expectations, not yield differentials.

Key Takeaways

• The US Dollar Index has broken out above resistance near the 100 level, a move that could have significant implications for the US economy.
• The dollar's trajectory during Trump's two terms is almost identical, with a sharp decline followed by a sustained climb.
• The macro backdrop is significantly different between the two terms, with elevated oil prices and a still-wrestling Fed.
• Policy sentiment, rather than yield differentials, is driving the dollar's movements, with the Trump administration's pro-growth initiatives leading the charge.

What This Means For You

The dollar's movements have significant implications for global trade and finance. As the dollar continues to break out above resistance, investors and businesses alike will need to be prepared for a potential shift in the global economic landscape. The implications of this move will be far-reaching, with potential consequences for trade, investment, and economic growth.

For everyday readers, this means that the dollar's movements will have a direct impact on your wallet. As the dollar strengthens, imports will become more expensive, and exports will become cheaper. This could lead to higher prices for goods and services, as well as increased competition for US businesses in the global market.

The call to action for investors and businesses is clear: stay vigilant and be prepared for a potential shift in the global economic landscape. As the dollar continues to break out above resistance, it's essential to stay informed and adapt to the changing economic conditions.