Investors outside the United States may be reducing their holdings of the dollar.
Although there are fewer financial events in the latter half of this week, market tension has not eased.
For traders, the biggest news this week is the significant decline of the dollar: the dollar is set for its largest weekly drop since August, and the 'Trump trade' seems to be losing momentum.
1. The dollar is a barometer for the global market, and its movement will directly affect the direction of major assets.
2. The current market focus is on the reasons for the dollar's decline:
Traders are contemplating whether this round of decline is a rebalancing behavior approaching month-end or a signal of a shift in the 'Trump trade.' The dollar's decline coincides with two critical moments:
· Moment 1: Approaching month-end (month-end portfolio rebalancing puts pressure on the dollar) - Since Monday (November 25), the dollar has retreated for five consecutive days, possibly related to fund managers' month-end adjustments.
· Moment 2: Trump announces Bessent as Treasury Secretary - This Monday (November 25) is the first trading day after the new Treasury Secretary's appointment. The market's reaction may reflect investors' expectations of future dollar policies.
3. Internal differences in the 'Trump trade':
Trump's economic agenda contains two core objectives, but they are inherently contradictory:
· Tax cuts to promote economic growth: Tax cuts stimulate economic vitality, potentially raising import demand, thereby expanding the trade deficit while boosting the dollar exchange rate.
· Increase tariffs to reduce trade deficit: Tariff policies will raise import costs, suppress consumer spending, which may drag down economic growth.
It is difficult to balance both; Trump needs to weigh between promoting economic growth and controlling the trade deficit. If this week's dollar decline is related to Bessent's appointment, the market may think Trump has clarified his priorities. In other words, if the current trend is authorized by Trump, then the dollar is in danger.
4. Outlook for next week:
As the market enters December, the movement of the dollar may become clearer. Notably, next week, Federal Reserve Chairman Powell will speak at the DealBook/Summit conference hosted by The New York Times. As one of the world's top economic forums, this conference attracts business leaders' participation. This will be Powell's third public appearance since the November interest rate decision (he has never appeared so frequently before), and he may release messages different from the past.
The market will be very sensitive to any fluctuations.
