Traders see Trump 2.0 as inflationary, prepare for Fed shift

Traders believe that Trump 2.0 will lead to inflation, so they are betting on stronger US bond yields and the US dollar. However, in recent weeks, the momentum of this trade has weakened as Democratic candidate Harris has changed the election landscape and eliminated Trump's advantage in opinion polls. As traders prepare for the Federal Reserve's shift, the Bloomberg Dollar Spot Index has fallen nearly 2% so far in August, the biggest drop since the market prematurely prepared for the Fed's shift at the end of last year. However, this time, Fed officials have clearly stated that they are finally ready to start the first rate cut of this cycle as inflation cools down.