Inflation, Interest Rates, and the US Dollar: The Trump Effect

First and foremost, prediction market traders are betting to
make money, not showing loyalty to any politician. Their goal is profit, and
they’re trying to secure bets at favorable odds based on who they think will
win. Several factors, like strong GOP voter registration data in swing states
like Pennsylvania, indicate that Trump has a solid chance of winning this
election.

What might change if Trump becomes president?

Analysts quickly highlight Trump’s plan to impose tariffs on imports,
a move economists widely believe would raise consumer prices, bring back
inflation, and push interest rates higher.

Trump has also pledged to extend the corporate tax cuts from
his first term, which are set to phase out in 2025. If Congress approves and he
signs the cuts into law, they would likely be paired with a deregulatory push
by federal agencies.

This combination of lower corporate tax and loose regulation
would likely boost corporate profits and drive the stock market upward. Trump’s
policies are expected to benefit sectors like oil, gas, and artificial
intelligence. At the same time, companies focused on renewable energy could
suffer if Trump rolled back the incentives that had been put in place under
Biden.

Trump Media & Technology Group, the parent company of
the social media platform Truth Social, could see a rise in value if Trump
wins. Truth Social
stock price has more than doubled over the past month as Trump’s standing
in some polls has improved.

However, while Trump’s policies could boost the stock
market, they might also pose risks.

On the campaign trail, besides tariffs, Trump has also
expressed plans to deport millions of undocumented immigrants, which some
economists argue could lead to a labor shortage.

Forex traders also position their portfolios to reflect
Trump’s economic policies, benefiting the US dollar. As the November 5 election
date approaches, increased volatility for the dollar is expected.

The US
dollar index recently surged to above 104.30, a three-month high, marking
its 15th day of gains in the last 17 sessions.

There have been many factors supporting the dollar’s rise
lately, including the prospect of a gradual reduction in Federal Reserve
interest rates and a strong US economy.

This article was written by FL Contributors at www.forexlive.com.