New President, New Trend For The Dollar? by Brent Donnelly
A positioning ourselves for a major, multiyear dollar rally. Many factors are moving in favor of the greenback as the global macroeconomic landscape changes, the subprime crisis ebbs, and the market now expects interest rate hikes from the Federal Reserve before the end of 2008. One of the most important — but least discussed — dollar-bullish factors is the upcoming election of a new President of the United States.
The end of George W. Bush’s eight-year term as US President could be a significant catalyst for a major reversal in the US dollar. Historically, the dollar has oscillated around
its long run average of 100.22, tending to make cyclical peaksand troughs almost exactly as a new President takes office.
Take a look at Figure 1 and you can clearly see that since the dollar went off the gold standard in the early 1970s, every new President has represented a major turning point for the dollar. In Figure 2, you see the dollar’s performance under each President.