As the 2025 US election approaches, Donald Trump has re-entered the political spotlight with a bold economic campaign. His promises include tax cuts, protectionist policies, and strong pressure on the Federal Reserve to cut interest rates. Meanwhile, Fed Chair Jerome Powell remains committed to maintaining price stability and the 2% inflation target.
Tensions escalated further as several Republican figures, including Senator Cynthia Lummis, publicly called for Powell’s resignation, citing dissatisfaction with the Fed’s handling of interest rates and crypto regulation.
Impact on Financial Markets
- Stock Market
Uncertainty surrounding economic policy and a potential Fed reshuffle is fueling market volatility. Financials, real estate, and energy stocks are likely to be the most affected. - US Dollar (USD)
Trump’s stance to weaken the dollar for export competitiveness could reduce investor interest in the USD. However, if the Fed remains hawkish, dollar strength may persist. - Bonds & Yields
Tensions may drive a flight to safety in short-term US Treasuries. Yet, if fiscal risks rise under Trump’s potential policies, long-term yields could surge.
Trading Strategies Amid Political Uncertainty
- Watch Data and Sentiment
Closely monitor inflation releases, PCE data, and Fed speeches. Pay attention to headlines about fiscal policy and political pressure. - Use Short-Term Timeframes & Hedge Your Portfolio
During high volatility, short-term strategies like breakout or range trading are effective. Hedge positions with tools like the VIX, gold (XAU/USD), and Japanese yen (USD/JPY). - Focus on Sensitive Pairs and Defensive Sectors
Currency pairs like EUR/USD, USD/JPY, and GBP/USD react strongly to US political news. In equities, consider short-term defensive plays like consumer staples and utilities.
source: https://www.youtube.com/watch?v=NbBAyVNMyhw
