Steno Signals #203 – Could Trump's policy mix weaken the USD by another 20%?

Trump’s wins on Canada’s digital tax and the SLR relief show he’s gaining traction. Markets still underprice a U.S. shift toward Abenomics-style policy.

Happy Monday from Copenhagen!

The headline landed late in Friday’s session: Trump pulled the rug out from under negotiations with Canada unless they scrapped the implementation of the digital sales tax scheduled to go live on July 1.

The market’s reaction to Trump disrupting talks over Canada’s digital services tax hasn’t been bearish at all — and for good reason. If Trump indeed managed to force a rollback of Canada’s tax plan, it could save tech giants like Google and Amazon an estimated $1–2 billion per year in Canadian taxes. More importantly, it sends a strong deterrent signal to the EU (and others) that have been eyeing similar taxation frameworks.

This move could easily be interpreted as a positive for the Nasdaq, not a negative — and the sharp rebound we’ve already seen lends support to that interpretation.

Moreover, the suggested SLR relief brought forward by the extraordinary FOMC meeting last Wednesday also underscores that the Fed is increasingly willing to play ball with the political objectives laid out by Trump again this weekend in the Fox interview.

The Fed’s proposed revisions to the SLR—driven largely by Treasury pressure—signal a major, underappreciated shift toward credit easing via private banks rather than Fed balance sheet expansion. By lowering capital requirements for U.S. G-SIBs, the rule change could free up over $200 billion in lending capacity—equivalent to 1.5–2 months of peak Covid-era QE—fueling system-wide USD liquidity without showing up in Treasury demand.

While markets have largely shrugged this off, the implications are profound: more liquidity sloshing around is typically bullish for risk assets, bearish for the dollar, and a subtle indicator of growing political influence over Fed policy.

We just need a new shadow Fed Chair in place soon, and we’re close to reaching the end station—one final, big debasement case.

Chart of the week: Remember Abenomics?