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USD: dollar tumbles following Trump defeat

By Ricky Bean March 27th, 2017

The US dollar fell in early trading this morning as confidence was undermined by President Donald Trump’s failure to push through his healthcare plans.

Throughout the week last week, the dollar didn’t see much movement as news headlines focused on the American Health Care Act. The dollar was, however, already at two-month lows against a basket of currencies.

Markets tend to be risk-averse and there will now be doubts over President Trump’s ability to push through the expected fiscal and economic reforms.

It’s being questioned whether the dollar will resume the rally that took it to 14-year highs against other major currencies earlier this year. The Federal Reserve economic data index, which measures the dollar on a trade-weighted basis against 26 peers, shows it is near its peak. Real exchange rates tend to mean-revert, therefore, at present, the dollar is seen as overvalued. The coming months will show if this is indeed the case, starting next Wednesday when the formal Brexit process begins.