Analysts have commented on the U.S. dollar trend following President Joe Biden’s decision not to seek re-election, noting a slight decline in the dollar against a basket of currencies. Bank of America’s head of global foreign exchange research mentioned: “There is a growing consensus that the dollar will be stronger if Trump wins due to tax cuts and tariffs. However, it’s more complicated as Trump doesn’t want a strong dollar.”

Analysts Weigh in on USD Trend Amid Political Shift

The U.S. dollar experienced a slight decline against a basket of currencies and a notable drop against the yen on Monday, driven by significant political and economic developments. President Joe Biden’s decision to withdraw from his re-election bid and endorse Vice President Kamala Harris for the Democratic nomination took center stage, influencing market sentiments. Consequently, the dollar index, which measures the dollar’s strength against a basket of foreign currencies, decreased by 0.1% to 104.30.

Analysts provided diverse perspectives on the dollar’s outlook following Biden’s announcement. Athanasios Vamvakidis, Bank of America’s head of global foreign exchange research, commented:

There is a growing consensus that the dollar will be stronger if Trump wins due to tax cuts and tariffs, but it’s more complicated than that as Trump doesn’t want a strong dollar.

He emphasized the complexity of the U.S. dollar’s response to political changes, indicating that market movements are primarily driven by data and central banks unless candidates specifically mention the U.S. dollar. “Recent events taught us we should not expect the dollar to react to election developments unless the candidates make specific reference to the U.S. dollar … I expect the market to continue trading on the back of the data and central banks,” he opined.

Neil Roarty, an analyst at the investment platform Stocklytics, also provided his insight on the weakening dollar following Biden’s withdrawal. “The dollar weakened slightly against most major currencies in the wake of Joe Biden’s announcement on Sunday that he would not stand for re-election in November,” he detailed. “At face value, a weakening dollar might suggest traders would have favored the relative stability of another Biden term in the White House. But Donald Trump was already a clear front-runner, ever since Biden’s disastrous debate performance last month.”

The analyst noted that the greenback has surged in value over the past couple of years, particularly as the Federal Reserve raised interest rates. “Trump has previously said that he prefers a weaker dollar to help domestic manufacturers sell abroad,” he continued, concluding:

With Trump leading across most polls and prediction markets, this initial decline might just be the beginning of a greater trend.