Donald Trump became the 47th President of the United States of America at his 20th January inauguration earlier this week. Economic pundits and forecasters have been projecting what the likely impact of his ascension will be on global markets and their currency exchange to the mighty US dollar.
What is the effect likely to be on the Euro and the Pound sterling exchange rate specifically for example? The US dollar performed well, relative to the Euro and Pound, late in 2024, due to expectations of a Trump win and a robust US economy.

Market observers believe Trumps policies of reduced taxation and punitive tariffs on imports to the US will now boost growth further, especially compared to currently weaker conditions and instability in the Eurozone and the UK. The dollar gained 3.65 percent against the Euro and 1.5 percent against the pound respectively as Trumps return was announced.
Yet, this demand for the dollar might continue in the short term but might not last throughout 2025 as pundits believe the dollar is currently overbought and overvalued.
It is early days for the new Trump administration and a volatile, fluid situation for currencies. Prudent forecasters look to the longer-term view. Trump may face challenges in completely implementing his inflation and growth agenda, not to mention his many campaign promises, causing downward currency pressure.
As in other, newly minted administrations, the first 100 days will give the markets a more solid idea of what ground will be laid in tangible policy making and regulatory certainty.
Despite planned US fiscal scaling back policies, it is likely a larger, growing fiscal deficit might be harder to shrink and counteract than promised, causing the currently strong US dollar to weaken against the Euro and Pound later in the year.
Trumps announcement of a 25 percent tariff to be imposed on both Mexico and Canada in February this year has already impacted these countries’ currencies negatively.
The author of “Let’s make a deal “has publicly said negotiation is key in business and the touted tariffs against foreign country imports could be a negotiating tool rather than a hard and fast goal.
In addition, Trump plans to impose further tariffs of up to 60 percent on Chinese imports to the US and 10 -20 percent on other countries imports, possibly triggering trade wars and reshaping or disrupting global supply chains.
It remains to be seen how definitively these, “America First” tariffs will be applied and their sustained impact on global currency exchange to the US dollar.
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