On Monday, financial markets welcomed President-elect Trump's nomination of Bensent as U.S. Treasury Secretary, with global currency markets rising as hopes grew that this hedge fund manager could mitigate the impact of some of Trump's more extreme economic views.

The dollar index fell below 107 on Monday; the euro rose above 1.05 against the dollar. Currencies such as the yen, pound, and Australian dollar also appreciated against the dollar.

These moves were a response from global investors to Trump’s indication last Friday evening that he intended to nominate Bensent for one of the most influential positions in the U.S. government. The Treasury Department has broad oversight of tax policy, public debt, and international finance.

Strategists believe that Bensent is a "safe choice" as he is a well-known market participant and a more moderate option compared to some of his competitors.

The 62-year-old Bensent is expected to push Trump to implement a more moderate tariff policy, reduce regulation to promote growth, and aim to decrease deficit spending.

Susannah Streeter, head of funds and markets at Hargreaves Lansdown, stated in a research report: "Trump's choice for Treasury Secretary further inflates investor sentiment, and Wall Street stocks seem poised for a new rally."

She added, "Bensent's long market experience has bolstered confidence in the forthcoming pro-business policies and raised hopes that any tariffs will be highly targeted and that core inflation will remain low."

Phased implementation of tariffs

Trump's victory earlier this month heightened concerns about rising prices, prompting strategists to rethink the outlook for global bond yields and currencies.

It is widely believed that Trump’s commitment to tax cuts and significant tariff increases may promote U.S. economic growth, but it could also expand the fiscal deficit and exacerbate inflation.

To increase revenue, Trump previously suggested imposing a comprehensive tariff of 20% on all goods imported to the U.S., tariffs of up to 60% on Chinese products, and tariffs of up to 2000% on cars produced in Mexico.

While many economists are skeptical about the effectiveness of tariffs, Bensent defended tariffs as a "useful tool for achieving presidential foreign policy objectives." However, he also called for the "phased" implementation of tariffs.

The analyst from Rabobank stated in a research report: "The news that Bensent is the preferred choice for U.S. Treasury Secretary has increased the likelihood that the 'Trump trade' may be toned down."

They added, "Bensent is a successful macro hedge fund manager who tends to reduce the U.S. budget deficit to 3% of GDP, which clearly indicates he has a smaller appetite for deficit spending."

Bensent previously worked for billionaire philanthropist and investor Soros, advocating for the so-called '3-3-3' goal, which aims to reduce the U.S. deficit to 3% by 2028, achieve 3% economic growth, and add 3 million barrels of oil production per day.

Status quo?

Some strategists expect that Trump’s Treasury Secretary pick will be seen as good news for Asian currencies in the coming months.

Scott Spratt, a strategist at Société Générale and investment bank, stated in a research report, "The market sees Bensent as a 'safe choice.'"

He added, "We doubt he believes tariffs should be implemented 'phased' and that the initial levels being discussed are a 'maximized' position, which should also boost Asian currencies."

Tesla CEO Musk believes that nominating Bensent as Treasury Secretary would be disappointing. Musk described Bensent as a "status quo choice" in a social media post on November 16, adding that "the status quo is dragging America down."

Bensent is also an advocate for Trump supporting the crypto industry, which means he may soon become the first Treasury Secretary to publicly support crypto assets. Trump had previously pledged to make the U.S. the "cryptocurrency capital of the world."

Article reposted from: Jinshi Data