Signals in dollars hanging from the strings on blue background. | Photo credit: Istockphoto
Dollaration is the word of fashion in economic circles these days. Why not, after all confusion and chaos, unleashed by Trump’s tariffs and erosion trust in the dollar!
Given the wild movements in the dollar, the euro and the gold in the first four months of 2025, one could be tempted to think that this is now a secular trend.
For example, the 8.31 percent drop in the dollar index in the first four months is the second most steep fall in the last fifty years. The euro, the largest component in the dollar index with a peso or 57.6 percent, has increased 9.41 percent against the dollar in this period.
This is the third largest increase for the fifty -year period (before 1991, the value of the euro was calculated using Deutsche Mark). In addition, Gold recorded his second best year for the period of four men in the last fifty years.
The 25.28 percent increase in yellow metal is the second highest, after the increase of 26.58 percent seen in 2006. A maximum of $ 3,500 per ounce reached in April, the increase of Gold stood at 33.36 percent.
These are great historical movements that are a result and a consequence that worldwide investors begin to non -American porn assets, reversing a multi -decades trend.
But with these new challenges can come for the global economy. Because, after all, USA and the global economy joins the hip!
The other side
The weakness of the dollar will make the import cost of the United States higher in a normal situation. But this time, things will be different when the highest tariffs will also come into play.
An import rate of weak Dollar Plus Highher will be a double blow for American in Imtorters and, consequently, also for its commercial partners.
The data of the US Economic Analysis Office (BEA) show that imports of goods to the US increased 12 percent significantly to $ 328.93 billion (in February) of $ 293.36 billion (in December.
Part of this because either some retreats in imports ahead or ads of expected rates. But the key factor to take into account is that imports of US goods are significant at an annual rate of around $ 3.5 billion.
Undulation effect
Continuous development in the currency market can affect global economies in two ways.
The first scenario could be that, if US companies decide to reduce their imports in the back of high tariffs, then the economies of countries that export to the US. UU. They will be affected. Will cause a slowdown of global trade.
The second scenario would be that if businesses remain as usual, then US importers will have to transmit their cost to their consumers.
This will increase inflation in the USA. Thus increasing the housing of an economic deceleration there. In any case, there is the danger of a possible global slowdown in the future if the dollar index continues to fall.
Exhaust plan
To avoid the dangers of a global deceleration mentioned above, the drop in the dollar index should stop, an increase greater than 100 and hold it.
In the graphics, the level of 96 is a crucial support for the dollar index. If that remains and an increase above 100 happens, then the dollar index can increase up to 104-106 again.
This will avoid the worst case.
But if the dollar index decreases below 96, it can fall to 90. This wants the condition and increase the risk of seeing a global economic slowdown this year.
Any victory in Dollaria that is claimed then could be a pyrrhic victory.
Posted on May 3, 2025