President Trump's string of promises for infrastructure spending, tax reform and repatriation of outsourced manufacturing, boosted both market confidence and consumer confidence. On the other hand, Trump administration's failure to pass legislation to restructure the health care system, has diminished confidence in his promises. This resulted in U.S market and STOXX Europe 600 to drop. Will this be the end of the bull market of the past 3000 days?
Tax Policy Changes
Analysts have previously stated that tax policy changes would be harder to rally support for in comparison to health care. The outcome of these theories resulted in the 1% drop of U.S index S&P 500 futures and in a smaller yet significant 0.7% drop of the Stoxx Europe 600 futures. Nevertheless, European stocks are expected to outpace U.S stocks in the forthcoming days.
Dollar Slips, Euro Rises
As expected, the drop in the market indices futures has affected the dollar's value, too. There is a high possibility that this drop would indicate any additional volatility in currency pairs associated with USD. Conversely, this wide felt slump has resulted in the rise of the value of currencies such as the Gold/USD and Yen/USD pair. There was an increase of 1% in Gold on the 27th of March- reaching $1258.48 (November value)- an effect of the voting down of the health-care reformation bill. The rise in euro after Angela Merkel's party victory in the Saarland state gave a possible indication of the outcome of her election.
Even though closely tied base currencies such as the EUR, USD, GBP may have some expected volatility, there will be some increase in volatility in the coming days considering the important upcoming political and economic events. Some of these are:
- The two-year negotiations for Brexit. Contrary to Theresa May who wants to simultaneously start the negotiations regarding split and trade agreements, the EU wants to start talks regarding the split agreement first and then move on to trade agreements.
- The same day that Britain's journey to leave the EU begins, proposals for the border wall between the U.S and Mexico are due.
- Mexico, Thailand and South Africa will set interest rates.
- Samsung will introduce their latest smartphone- Galaxy S8- in an effort to recover from the Note 7 disaster
If you want to keep up to date with events that can affect the USD's movement, you can visit our economic calendar on STOFS.com
This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.