Trump Embraces a Weaker US Dollar
The US Dollar continues to decline as the market awaits the Federal Reserve’s interest rate decision. A decision not to adjust interest rates is almost certain, but investors will be hoping for more guidance on March’s decision.
However, the hawkish Federal Reserve is not supporting the US Dollar in any way. The US Dollar Index is trading at its lowest price since early 2022 and the President’s recent comments are fuelling poor sentiment towards the currency.
The decline in the US Dollar is consequently supporting Gold and Metal prices, while institutions increase exposure to the Swiss Franc, Australian Dollar and New Zealand Dollar.
USDCHF - Swiss Franc Approaches 15-Year High Against US Dollar
The US is experiencing particularly strong economic data and a resilient employment sector. Inflation on the other hand remains above the Federal Reserve’s target but below most economists’ projections. Nonetheless, even with inflation remaining lower than expectations, the Federal Reserve is under no pressure to cut interest rates in the economy.
The Federal Reserve is likely to keep interest rates unchanged for the first quarter of 2026 in order to ensure inflation does not rise. The Fed is likely to cut on one occasion in the second quarter and another in the third quarter. However, the hawkishness of the Federal Reserve is not supporting the US Dollar.
The decline in the US Dollar is driven by questions over the independence of the Federal Reserve. Additional pressure comes from the upcoming appointment of a new chairman in May and the president’s embracing a weaker Dollar. Markets expect the new chairman to be more in line with the administration’s dovish stance. Overnight, the US President, Donald Trump, told investors that ‘I think the value of the Dollar is great’ and he would not be worried about the decline continuing.
Reports suggest the Trump administration could favour a gradual decline in the US Dollar to support manufacturing. At the same time, institutions and countries are working to reduce exposure to US volatility.
The Swiss Franc is one of the best performing currencies of the day and is the third best of the year so far. Investors are increasing their exposure to the Swiss Franc due to its safe haven status. In addition, the Swiss Franc is less at risk of any backlashes from geopolitical issues. This is also supporting the price of the Australian and New Zealand Dollars.
Australian Inflation Continues to Rise
The Australian Dollar continues to find support from positive economic data fuelling speculation of no interest rate cuts in 2026. This morning, the monthly Consumer Price Index rose from 0.0% to 1.0% and the inflation rate rose from 3.4% to 3.8%. As a result, the inflation rate remains unstable and may indicate the country’s monetary policy is not adequately restrictive.
Previously economists were placing the probability of a rate hike at 50%. Economists are yet to confirm their new projection after the latest inflation data. However, the chances of an interest rate hike have likely risen.
Gold - A Weaker Dollar Continues to Fuel
Gold’s price continues to increase for a seventh consecutive day and has already risen more than 20% this month. However, technical analysts are becoming increasingly cautious about an overbought price. The Federal Reserve is not likely to cut interest rates in this quarter, and the stock market continues to rise while the economy performs well.
The price of the US Dollar Index is retracing slightly higher after the recent dip. If the price continues to rise above 96.00, the chances of Gold retracing will also grow. In addition, the VIX index has fallen more than 1.50% this morning, indicating a risk-on appetite. This can also slightly pressure Gold in the short term.
Key Takeaways:
- The US Dollar weakens as markets await Fed guidance despite rates likely remaining unchanged.
- Dollar sentiment is hurt by political pressure and doubts over Fed independence.
- A weaker Dollar boosts gold and metals; investors rotate into CHF, AUD and NZD.
- Swiss franc outperforms on safe-haven demand amid global volatility concerns.
- Rising Australian inflation strengthens AUD and raises interest rate hike expectations.
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Michalis Efthymiou
Michalis Efthymiou has extensive experience within the financial sector throughout the UK and Europe. After spending 5 years in London where Michalis operated as a financial advisor and an underwriter, he then entered the market analysis sector.
Additionally, he held training sessions and seminars in over seven countries across the globe and is now focused on providing investors with the required guidance to operate within the market with full confidence.
His teaching methods are based on technical analysis, fundamental analysis and order flow analysis, as well as how to view the market from an institutional angle.
