The Impact the Donald Trump Presidency on USD Exchange Rate
The Foreign Exchange Market is inherently volatile in its nature, constantly shaped by a complex interplay of macroeconomic fundamentals, investor sentiment towards countries, and geopolitical developments (Glantz & Kissel, 2014). This article will focus on geopolitical developments and their implications on the Foreign Exchange Market between the United States, Europe and the United Kingdom from the 1st of November 2024 and March 7th 2025. During this period, there were significant and unexpected fluctuations in the value of the US Dollar against both the Euro and the British Pound, reflecting the heightened political uncertainty following Donald Trump’s re-election. As financial markets respond to shifting global dynamics, the general depreciation of the Dollar during this period underlines the profound impact of a geopolitical realignment and investor sentiments around the strength of investments in the US, Europe and the United Kingdom.
Central to this short, recent period of volatility is Donald Trump’s evolving foreign policy approach, which has signalled a departure from the traditional US alliances in Europe and a recalibration of America’s geopolitical priorities, towards a more inwards approach. The perceived weakening of US-European relations and Trump’s apparent reluctance to confront Russia have unsettled markets, leading to an increased demand for the Euro and the Pound while eroding confidence in the Dollar. Key political events; including Trump’s election victory, the transition from Joe Biden’s presidency, an important speech by JD Vance at the Munich Security Conference, Trump’s meetings with European leaders and Ukrainian President Volodymyr Zelenskyy, have all played a crucial role in affecting recent market expectations and, by extension, exchange rate movements.
Exchange Rate Changes and Political Developments
The USD/GBP and USD/EUR Exchange Rates during this period reveal distinct changes which coincide with major political developments. Immediately following Trump’s election on November 5, 2024, the dollar experienced an initial increase relative to the Pound and the Euro, most likely as a result of the market reflecting its confidence in a Trump presidency, in comparison to the perceived presidency of Kamala Harris. From the period between the announcement of Trump’s successful political campaign until his tenure beginning in January 2025, the Exchange Rate market was positive for the Dollar, with a continued increase against both the Pound and the Euro. Interestingly, the moment in which the Dollar was seen as its strongest in comparison to the Pound and the Euro was in the moments prior to Trump taking office, with the Dollar’s highest score against the Pound coming on Friday the 17th of January, the last business day of Joe Biden’s Presidency.
The downward trend in the Dollar can be seen particularly around the time of Trump’s inauguration on January 20, the day that he assumed office, with the dollar weakening dramatically against both the Euro and the Pound. During Trump’s inaugural address, in which he reiterated a nationalist economic vision and suggested that European nations should take greater responsibility for their own defence spending, exacerbated fears of a diminished US commitment to global stability (The White House, 2025a). Markets interpreted these remarks as signalling a potential deterioration in transatlantic trade and security relations, potentially prompting further capital outflows from the Dollar towards the Pound or the Euro.
A more pronounced decline in the dollar’s value was observed in February and early March 2025, coinciding with a series of diplomatic engagements and statements that reinforced perceptions of a shift in US foreign policy. On the week beginning Monday the 25th of February, Trump held meetings with key political European partners in a bid to realign the security alliance between the United States and Europe. Trump met with key European leaders such as French President Emmanuel Macron, UK Prime Minister Sir Keir Starmer and Ukrainian President Volodymyr Zelenskyy. Both the meetings with Macron and Starmer were widely reported as successful, especially from a European security perspective, however, the meeting the Zelenskyy was not so successful as the US President was seen to be caught at loggerheads with the Ukrainian President (Bateman & Debusmann Jr, 2025).
This meeting raised concerns around Trump’s stance towards his European alliances continued, as the dollar had reached some of its weakest levels in the observed period. The sustained depreciation of the dollar against both currencies suggests that financial markets were pricing in the long-term risks associated with a more isolationist US foreign policy. During the Munich Security Conference, Vice-President JD Vance was seen to have launched an attack on Europe and European governments, clearly indicating that he did not perceive Europe to be at threat from Russia or China, but rather ‘a threat from within’ (The White House, 2025c). The remarks made at the conference was met by stunned confusion and an unexpected political attack out of nowhere, ultimately such remarks further highlighted the United States’ move away from the post-WW2 consensus, towards a more isolationist view of politics (Mcleary, et al., 2025).
Prior to this another important moment which highlights the fragility of exchange rate markets in relation to the actions and statements of a US president was on February 10th whereby the Trump administration imposed a 25% tariff on all steel and aluminium imports (The White House, 2025b). It can be seen that the Exchange Rates between both the Pound and the Euro depreciated on this day, further highlighting the impact that Presidential remarks have on global Exchange Rates. In general, it cannot be undermined the impact that a more isolationist geopolitical approach to politics will have on the United States economy. The data shown highlights the impact that such strategies have had, and will continue to have in the future, on the exchange rates between the US Dollar, the Pound and the Euro respectively.
The Consequences of Trump’s Perceived Shift Toward Russia
One of the most consequential aspects of Trump’s foreign policy realignment has been his perceived pivot towards a general acceptance of Russia, which has introduced significant uncertainty into global markets. His reluctance to condemn Russian geopolitical manoeuvres and his critical stance toward NATO have raised concerns about the stability of US-European relations. On the 23rd of January, Trump made remarks at the World Economic Forum, stating that he would be putting increasing pressure on European nations to commit economically to NATO (The White House, 2025d). The financial implications of this shift are profound, particularly in the context of the ongoing Russia-Ukraine conflict, whereby a continued Western unity has been seen as crucial in order to maintain economic and security stability in Europe.
Trump’s ambiguous approach toward Ukraine has further fuelled investor anxiety. During his meeting with Ukrainian President Zelenskyy, rather than reaffirming strong US support for Ukraine, it was characterized by vague statements and a lack of concrete commitments towards the war effort. Investors interpreted this as a signal that the US might scale back its military and financial support, potentially prolonging instability in Eastern Europe. The Dollar’s decline during this period reflects broader market concerns that a weakened US commitment to Europe could lead to economic and political fragmentation, potentially reducing investor confidence in the dollar as a global reserve currency more generally.
In contrast, Trump’s perceived warming relations with Russia have contributed to speculation that the US might pursue a more transactional, rather than strategic, approach to international diplomacy (Nemeth, 2025). His lack of criticism toward Russia has prompted fears that US policy may be shifting in ways that could disrupt existing trade agreements, defence alliances, and financial markets. This uncertainty has diminished the attractiveness of the dollar, as investors seek safer alternatives in European currencies (Montgomery & Wallace, 2025). The Euro, in particular, has benefited from this shift, as European economies are increasingly viewed as maintaining a more stable geopolitical posture in the face of US unpredictability (Montgomery & Wallace, 2025).
Conclusion
The depreciation of the US dollar against the Euro and the British pound between November 2024 and March 2025 reflects broader geopolitical uncertainties stemming from Trump’s administration. His perceived shift away from traditional US-European alliances and his ambivalent stance toward Russia have introduced significant instability into financial markets, leading investors to reassess the future of transatlantic relations. The dollar’s decline has been driven not only by immediate market reactions to political events but also by deeper concerns about the long-term trajectory of US foreign policy and its implications for global economic stability.
These exchange rate movements have far-reaching macroeconomic consequences, they could further affect inflationary pressures in the United States, as well as impacting the trade competitiveness of both the USA, Europe and the United Kingdom. As Trump’s presidency develops, financial markets will closely monitor his policy decisions, particularly regarding geopolitical relations with Europe, Russia and naturally further afield too. Whether the dollar’s depreciation proves to be a temporary reaction or a more sustained trend will depend on the administration’s ability to restore investor confidence and reaffirm the United States’ role in global economic leadership.
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