It is clear that the inauguration speech of the newly elected U.S. President, Donald Trump, on Monday, January 20, 2024, was fiery and resolute, as he outlined a series of executive orders that he pledged to implement. Some of these include:
- On Tariffs: Trump announced imposing tariffs on foreign goods, including a 25% tariff on imports from Mexico and Canada starting on February 1.
- On Energy: Trump declared a state of emergency in the energy sector, focusing on rebuilding reserves and intensifying exploration.
- On Government: Trump announced the establishment of a government efficiency ministry.
- On the Economy: Trump declared his intention to lower prices, curb inflation, and save the American car industry.
- On Immigration: Trump announced a state of emergency at the southern border, aiming to deport illegal immigrants and tackle the gangs responsible for illegal immigration.
Notably, there were two significant issues Trump did not address in his inauguration speech: the anticipated tariffs on China and support for cryptocurrencies.
The question that arises is: What are the expected impacts of these executive orders on global financial markets?
Given the expected expansionary monetary and fiscal policies under Trump, coupled with uncertainty regarding foreign relations and the potential for large tariffs on imports from China, Mexico, Canada, the European Union, and other countries, we are likely to witness an increase in inflation. As a result, the Federal Reserve may be forced to keep interest rates elevated for a longer period or even raise them. Consequently, the U.S. Dollar Index, which measures the performance of the dollar against a basket of six major currencies, could rise to levels between 112.00 and 115.00 points, after having registered approximately 110 points on January 13, 2025. This could also be accompanied by an increase in U.S. Treasury yields (a decrease in Treasury bond prices) across various maturities, such as the 10-year Treasury yield, which is likely to exceed 5.00%, after having recorded around 4.80% on January 13, 2025.
As for gold, the continued buying of gold by central banks, especially BRICS countries that are moving away from the dollar, led by China and India, is expected to persist. Alongside global economic and geopolitical uncertainty, as well as expectations of rising inflation in the U.S. due to Trump’s expansionary policies, gold could see an upward momentum. The price of gold may reach levels between $2,800 and $3,000.
Regarding global stocks, we may witness a rise in U.S. stocks, especially in sectors related to artificial intelligence, energy, manufacturing, and finance. Therefore, we could continue to see record levels for U.S. indices like the NASDAQ 100, S&P 500, and Dow Jones. In contrast, European and Chinese indices could experience declines due to potential trade tensions between the Trump administration and other global parties, in addition to economic uncertainty in both China and Europe.
Regarding cryptocurrencies, particularly the leading cryptocurrency, Bitcoin, it is likely to reach new record levels between $150,000 and $200,000. This is especially likely given Trump’s commitment to making the U.S. the global hub for cryptocurrencies, his intention to create a U.S. strategic reserve for Bitcoin, and the appointment of Paul Atkins as the head of the SEC, who is known for his pro-cryptocurrency stance, among other positive factors surrounding digital currencies.
As for the Euro, it is possible that we will see a weakening of the Euro against the U.S. Dollar, with the EUR/USD exchange rate potentially fluctuating between 1.0500 and 0.9500. For the British Pound, a weakening trend is also possible, with the GBP/USD exchange rate likely ranging between 1.2500 and 1.1500.
Regarding the USD/Chinese Yuan pair, there is a chance that it could rise to levels between 7.5000 and 8.0000, especially with the continued easing measures by the People’s Bank of China aimed at supporting the economy. It is expected that the People’s Bank may cut interest rates by about 50 basis points this year.
Finally, regarding crude oil prices, there is considerable uncertainty, particularly as several factors influence the oil market, such as the impact of OPEC+ on production and supply, as well as production from non-OPEC+ countries like Canada, Brazil, and the U.S. Additionally, the level of demand for oil and sanctions on Russian and Iranian oil, along with Trump’s facilitation of exploration, could lead to crude oil prices ranging between $70 and $90 per barrel.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
