The US needs to lower interest rates to refinance about $9 trillion of debt and a weaker dollar won’t happen unless there’s a slowdown or a recession, which is what Trump is aiming to trigger. The concern is around his execution and the market also doesn’t seem to understand his endgame with tariffs. It’s about leveling the playing field. The US pays about 10–15% in tariffs, while it charges only around 2.5% - they want to reverse that imbalance.
Has he succeeded in pressuring the Fed?
The Fed is structured to be independent. Chairman Powell has a dual mandate: either employment has to crack, or inflation fall, for him to drop rates. Right now, the data shows that inflation might start easing, but the Fed doesn’t forecast - they react. Once inflation is clearly below 2%, and if the labor market weakens, they’ll cut rates. Until then, it’s business as usual.
It appears China is gaining the upper hand on trade negotiations?
I think the market is misreading that. Trump has more leverage than China - which is dealing with deflation, high unemployment, post-COVID industrial weakness, and a weakening yuan, and they can’t print more money without causing capital flight. Factories are shutting down due to less exports to the US – that’s not a market they can replace overnight, and Trump knows this. China is trying to forge new alliances, with Mexico and Europe, but those relationships take time. Ultimately, both sides will seek a fair deal.
Further upside for gold above $3500?
Gold has had a phenomenal run since 2022, largely sparked by Russia’s invasion of Ukraine. Central banks around the world have been increasing their gold reserves, seeing it as the ultimate asset for preserving sovereignty and financial security. China has been a particularly aggressive buyer. Over the last two months, sentiment has been extremely bullish, and I think that’s gone a bit too far, too fast. But if you believe in a slowdown or a recession, then gold remains the only real safe haven. Equities aren’t showing strong earnings growth and bonds are being pulled between recession signals and inflation concerns.
How much further downside for the USD?
We’re no longer in trade wars, we’re in currency wars. Every country wants a weaker currency to boost exports. The USD hit its lowest point since 2011 this week, and it’s about 12% down since January. We needed a weaker dollar, but this has now gone too far. From a trader’s perspective, I think the 97.5–98.5 range is where things will start causing pain for other countries like Japan, the Eurozone, the UK - none of them want a strong currency.