Potential Trump Presidency in 2025 to Put Pressure on Cedi, Says Fitch Solutions
Fitch Solutions has noted that a potential Trump presidency in 2025 would most likely strengthen the US dollar, thereby exerting pressure on the Cedi and other emerging market currencies.
This, Fitch Solutions averred, would prompt the BoG to adopt a more restrictive monetary policy stance than currently anticipated.
“A potential Trump presidency in 2025 would most likely strengthen the US dollar, thereby exerting pressure on emerging market currencies, including the cedi. This would prompt the BoG to adopt a more restrictive monetary policy stance than we currently anticipate,” said Fitch Solutions.
The cedi as of July 19, 2024, per Central Bank data was trading at 14.7811 to the dollar, marking a substantial 19.6% depreciation since the beginning of the year.
Additionally, the current monetary policy rate of the BoG is pegged at 29% having been maintained for three consecutive times since March this year.
An increased potential for former President Donald Trump to win this year’s election stands to boost the US dollar even as the Republican party aims to offset the currency’s strength.
While former President Trump has spoken against dollar strength and proposed policies to devalue the strength of the dollar, market strategists and analysts think his policies would rather lead to a stronger dollar.
“An expansionary fiscal policy agenda in a Republican sweep outcome could boost expectations about US growth and encourage capital flows into the US. Higher US tariffs on the rest of the world could lead foreign authorities to allow depreciation of their domestic currency or weigh on economic activity abroad, making the US look more attractive in comparison,” said strategists Andrew Watrous and Zoe Strauss.
The research agency says it expects an increase in capital inflows following the conclusion of Ghana’s debt restructuring program will result in the cedi depreciating by only 6.0% in 2025, compared to 16.8% in 2024 and 24.9% in 2023.
The firm, however, pointed out that if debt restructuring negotiations extend beyond the current expectation of it being concluded in September this year, this could dampen investor sentiment and put downward pressure on the cedi.
Adding that such a scenario would likely sustain elevated inflation risks, compelling the BoG to keep rates higher for longer.
Fitch Solutions however, expects the BoG to resume monetary policy easing this year with a 2% cut in the policy rate in November with the monetary easing cycle further expected to extend into 2025, with the BoG lowering the key rate by a further 700bps to 20% by the end of the year.
