tag

QNB reported that the US dollar has maintained its status as one of the world's most important currencies and strongest financial assets over the past fifteen years, gaining more than 50 percent in value from the time of the global financial crisis and the European debt crisis (2008-2011) up to the second inauguration of Donald Trump as US president in 2025.In its weekly report, the bank said that the dollar's sustained rise was driven by the enduring outperformance of US financial markets and the reliance of global investors on dollar-denominated assets as a safe haven. Weak liquidity and heightened risk in both advanced and emerging economies drew capital flows into US Treasury bonds and equities, which benefitted from deep markets and unique advantages in security and innovation.However, QNB noted that the factors supporting the dollar's strength have come under significant pressure in 2025. The US Dollar Index (DXY) has fallen more than 10 percent since the start of the year, its largest annual drop since 1973, when President Richard Nixon ended the dollar's link to gold. The decline has been broad-based, spanning all major currencies in the index basket, including the euro, yen, British pound, Canadian dollar, Swedish krona, and Swiss franc.Trade-weighted, inflation-adjusted exchange rate measures continue to show the dollar as overvalued relative to historical norms, particularly over the long term, reflecting changes in trade patterns, economic imbalances, and inflation differentials.The report projected a marked decline in US exceptionalism, with growth and interest-rate differentials narrowing toward those of other advanced economies. QNB expects the gap in GDP growth between the United States and the euro area, which averaged 220 basis points in favor of the US in recent years, to shrink to about 70 basis points during 2025-2027. This shift is likely to be driven by US fiscal and immigration policies alongside more positive fiscal dynamics in the eurozone. The European Central Bank is expected to complete, or nearly complete, its monetary easing cycle, while the US Federal Reserve is forecast to implement significant interest-rate cuts through the remainder of 2025 and into 2026.As a result, the real interest-rate spread between the US and the eurozone is projected to narrow from the current 170 basis points to zero by late 2026, which would favor a stronger euro and push the US Dollar Index lower. Because the euro makes up 57.6 percent of the DXY basket, even moderate euro appreciation could have a notable impact.The report also highlighted US efforts to restructure its economy by reducing the current-account deficit and encouraging the reshoring of strategic industries. These moves could cut trade surpluses among key partners and reduce capital flows that traditionally support the dollar. Adding to the pressure is the United States' negative Net International Investment Position (NIIP), estimated at about $24.6 trillion, which implies a gradual adjustment that could weigh on the currency.Despite these headwinds, QNB concluded that the current indicators do not point to an excessive or disorderly decline in the dollar in 2025. While the first half of the year has seen a sharp drop, continued selling pressure is more consistent with a gradual correction driven by elevated valuations and cyclical and structural economic factors rather than a collapse in confidence.

The exceptionally muscular approach of President Donald Trump towards economic policy has revealed itself in direct efforts to undermine the independence of the Federal Reserve. He has made open personal criticisms of the chairman Jay Powell, and made overt attempts to have Lisa Cook, a member of the Board of Governors of the Federal Reserve, removed over an allegation related to a mortgage application.President Trump’s determination to oversee a devaluation of the dollar and lower interest rates will have direct effects on the Gulf, but will it bring a welcome stimulus or excessive inflation?In addition to the issue of whether his criticisms and actions are justified in terms of domestic politics, there are global implications to his actions and the direction of policy, with a particular impact on Gulf nations.President Trump’s strategic objective on economic policy is to oversee a devalued dollar, reduced trade deficits, and onshoring of production. A lower interest rate, for the short and medium term at least, is a central part of this policy, in addition to tariffs, so he has been frustrated that the current Board of Governors at the Federal Reserve has not made a reduction in 2025, following the three cuts totalling 100 basis points, between September and December 2024.The Federal Reserve has considered inflationary pressures to be too significant to justify a cut, but the pressure is growing, moreover Jay Powell’s term comes to an end next year, and the successor regime is likely to have a more dovish approach. It is likely that there will be two or three cuts this year. This, combined with continued rise in public debt, amount to an exceptionally loose fiscal policy. On the day after President Trump confirmed his intention to seek the removal of Lisa Cook, yields on long-dated US Treasuries rose significantly, confirming that while domestic checks and balances to his policies are weakened, he cannot avoid having to placate the international bond market.For the Gulf nations, there will be significant and direct effects. Most Gulf nations, including Qatar, have currencies that are pegged to the dollar. The Qatar Central Bank will effectively have to follow interest rate cuts by the Federal Reserve, and the riyal is set to depreciate in value against the Euro and Renminbi.The current interest rate in Qatar is 5.1%, higher than the US rate of 4.25-4.5%, and the Qatar Central Bank would like to reduce the gap. If the Federal Reserve cuts rates by 50 basis points this year, I would expect the Qatar rate to be 60 basis points lower.There will be a stimulus effect to this. Reduced returns for cash will stimulate business investments, and there is set to be a particularly positive impact on the real estate sector.On the downside, there are risks to inflation. Qatar imports around 90% of the goods that it needs, so as the effective cost rises as the riyal declines in value, imported inflation is likely to feature. While many invoices are in dollars, if the euro, renminbi and rupee appreciate in value against the dollar, costs in those currency areas will rise and the cost is likely to be passed on.This means that policymakers in Qatar will have to rely on measures other than the principal interest rate to curb inflation. This policy should be easier to implement than a decade ago, when inflationary pressures were also significant. This was because the state was embarking on a significant program of public sector investment, primarily to modernise infrastructure ahead of the 2022 FIFA World Cup. That phase is now complete, so the economy should be able to absorb additional stimulus without significant inflation rises, but it will be a feature to manage.Another side effect of Trump’s policies is appreciation of tangible assets, as the value of fiat currencies falls. Gold has appreciated considerably, and has been stockpiled by central banks, including China’s. Holdings of gold by central banks now represent a bigger share than US Treasuries, for the first time since 1996. The price of gold leapt from around $2,500 per ounce in late 2024 to above $3,600 by September 2025.Other precious metals, as well as land, real estate and rare earth metals, are also likely to appreciate in value, or stay at an elevated level. Oil and gas prices will likely also rise, to the advantage of the Qatar exchequer as liquefied natural gas (LNG) is the primary export.There should be bullish prospects also for Qatari equities. The stimulus promises growth and with a downward nudge in the value of the riyal, they may appear cheap.To an extent, President Trump is achieving his policy aims: the dollar is declining in value – down around 11% in the first half of 2025 – tariff receipts have increased, interest rates are likely to be forced down.The risks to the US are considerable, however, as a long-term decline in the value of the dollar combined with high and rising public sector deficits and debt can cause instability and nervousness in the bond markets. An independent Federal Reserve had an uneven record on curbing US inflation, but if there is little concerted effort to keep it under control, we may be heading for uncharted territory. Outcomes for Gulf states, however, may be surprisingly benign.The author is a Qatari banker, with many years of experience in the banking sector in senior positions.

Giorgio Armani's death leaves a vacuum at the top of his billion-dollar luxury business, an independent empire he built up over 50 years spanning hotels to haute couture.Born into a modest family in northern Italy, Armani, who died on Thursday aged 91, became one of the richest men in the world and the fourth richest in Italy.His net worth was estimated at $11.8bn, according to *Forbes magazine.From his historic headquarters in Milan, Armani led an empire employing more than 9,000 staff at the end of 2023, and with revenues of €2.3bn ($2.7bn) in 2024, according to the group.More than 600 stores worldwide sell Armani brands under several lines: Giorgio Armani, Emporio Armani, A|X Armani Exchange, and EA7.The group also licenses eyewear from EssilorLuxottica, and perfumes and cosmetics from L'Oreal.Armani is also active in the hotel, restaurant and real-estate industries, with building collaborations in China, Miami and Brazil.A sports enthusiast, the designer owned the Olimpia Milano basketball team and designed formalwear for Juventus and the Italian national football team.Armani had no direct heirs, but he had long planned for his succession, keen for the integrity and independence of the group to outlast him.According to the Italian press, a new statute has been ready since 2016 for his death. It would see the creation of six classes of shares with specific voting rights and governance prerogatives.In this new structure, a central role is expected to be played by the Giorgio Armani Foundation, which holds 0.1% of the Armani group's capital, and by the designer's close relatives and friends.These include his nieces Silvana and Roberta Armani, his nephew Andrea Camerana, his sister Rosanna Armani, and his right-hand man Leo Dell'Orco."I would like the succession to be organic and not a moment of rupture," he told the *Financial Times in an interview published just days before his death."My plans for succession consist of a gradual transition of the responsibilities that I have always handled to those closest to me," he said, "such as Leo Dell'Orco, the members of my family and the entire working team".Armani owned numerous properties in Italy and abroad. In addition to his main residence in Milan, on Via Borgonuovo, the designer regularly sought refuge in his villa on the island of Pantelleria, in his summer residence in Forte dei Marmi, an upscale seaside resort in Tuscany, or in his "Villa Rosa", south of Milan.He had numerous other residences abroad, notably in France — in Paris and Saint-Tropez — and in Saint Moritz, Switzerland.A few days before his death, Armani completed the acquisition of the "Capannina di Franceschi", the legendary Forte dei Marmi club where he met his partner Sergio Galeotti, with whom he went on to found Giorgio Armani in 1975.Armani remained one of the few independent luxury groups, at a time when most designers were being bought out by conglomerates.After years under Armani's tight control, his death raises the question of what happens next to a company so closely associated with one man.Luca Solca, analyst at research group Bernstein, said the Armani group benefited from being "a little more universal" than others, attracting a wide audience, much like Ralph Lauren."There is certainly a lot of interest in acquiring the group — it remains to be seen if there are any sellers after the succession," he told AFP.It is a difficult time for the luxury industry, hit by slowing growth in China and the uncertain global economic outlook.The Armani group has not been spared, reporting a 6% drop in revenue in 2024.But Armani kept investing — €332mn over the year — notably renovating its stores in New York and Milan and opening a new one in Paris.It has also taken its online sales operations in-house."I am convinced that pursuing consistency and continuity, avoiding chasing immediate gains, is the best strategy to ensure success in the long run," Armani said this year.