In truth, it was inevitable that the seemingly invincible American Dollar (USD) would depreciate at some point during this year.

Many thought that this would be an issue of choice or policy, however, with President Donald Trump thought to be keen on the notion of a weaker dollar and its ability to drive more competitive exports.

Instead the value of the USD has continued to plummet against a backdrop of geopolitical tumult, with the ongoing Russia inquiry at the very heart of this depreciation.

The Story So Far

In truth, Trump’s already tempestuous premiership has struggled with the fall-out from the the inquiry for months now, as Congress continues to investigate the accusation that Russian hackers interfered with the result of the U.S. election.

Trump and a number of his advisors have claimed that they had no interaction with Russian officials during the election campaign, but there is evidence to suggest otherwise while the President’s increasingly desperate attempts to cover his tracks (including the reckless dismissal of former FBI director James Comey) have poured further fuel on a raging fire.

As a result, the inquiry has gathered momentum during the last three months, with special prosecutor Bob Mueller having being appointed to lead the investigation and found himself the recipient of an indirect threat from the beleaguered President.

How Has This Impacted on the U.S. Dollar?

This is had an incremental impact on the USD since May, with recent numbers revealing that the British Pound (GBP) has soared by 8% against the dollar during the last 100 days and it set to make further gains in the weeks ahead. This is despite the fact that the GBP continues to trade in a narrow range against the backdrop of Brexit, with the pound having depreciated significantly since the EU referendum vote last June.

As even those who are new to the forex market can testify, this is a significant swing and one that hints at the debilitating effect that the Russia inquiry is having on U.S. currency. So while the stock markets have so far remained strangely unmoved as the crisis has unfolded, the USD continues to depreciate while inflating the cost of imports and driving wider uncertainty.

As if this was not enough, the situation is likely to get worse before it begins to improve. After all, we have seen Trump backed into a corner recently as the inquiry has piled pressure on his administration, with Congress looking to place heavy sanctions on Russia despite the President’s previous reluctance to follow such a course. His arm has finally been twisted, however, with Trump having signed a new bill that has sanctioned Russian trade while send relations between the two countries plummeting to a new low.

The Last Word: A Trade War Will See the USD Decline Further

With the Kremlin responding to the sanctions by claiming that they effectively wage ‘a full scale trade war’ on Russia, the U.S. economy should expect sustained volatility in the months ahead. This will cause the USD to depreciate further, enabling the GBP to make further gains while driving U.S. import costs higher.

It is also yet another chapter in the Trump Presidency, which is shaping up to be the most disorganised, tumultuous and potentially catastrophic for generations.