Dollar Strengthens Over 3% Post-Election, Following a Pattern from Trump’s First Term
Since U.S. President-elect Donald Trump’s decisive victory two months ago, the U.S. dollar has gained over 3% against other currencies, following a trajectory reminiscent of his first presidential term. The DXY Index, which tracks the dollar’s value relative to a basket of major trading partners, peaked in December during Trump’s first win before weakening for the following year, aligning with the 2017 bitcoin bull run.
This time, however, the situation may play out differently. The DXY Index has shown no signs of reversing its upward trend. Trump’s economic policies, coupled with actions from the Federal Reserve, are expected to support the dollar’s strength going forward.
A stronger dollar typically weighs on risk assets, but Trump’s backing of bitcoin is having a contrasting effect. Since the election, bitcoin (BTC) has surged to new record highs, though it currently stands about 10% lower than its mid-December peak of around $108,300. According to Andre Dragosch, Bitwise’s head of research in Europe, bitcoin’s rally may slow but is still bolstered by the incoming administration’s stance on digital assets.
“The Fed is caught between two tough choices,” Dragosch explained in an interview over X. “They could either risk pushing the U.S. into recession by acting too cautiously or let inflation spike again due to delayed action.”
Trump’s promise to impose tariffs on key trading partners could intensify global geopolitical uncertainties, which might lead to increased demand for the dollar, traditionally seen as a safe haven during such times.
U.S. economic performance has also outpaced other regions, with GDP growth exceeding 3% and inflation running higher than target levels. This has led to elevated federal funds rates, with only two interest rate cuts expected in 2025.
“The Fed has signaled only two rate cuts for 2025—far fewer than many had anticipated,” Dragosch noted. “This policy outlook has contributed to the dollar’s continued strength and rising yields, which has created headwinds for bitcoin. The macroeconomic climate is certainly playing a role in the current BTC pressure.”
