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US President Trump to unveil an outline of his tax plan. Trump pledged massive tax cuts for corporations & individuals, and a one-time repatriation of corporate cash held abroad at a reduced rate.
If we get something along those lines today, it could prove positive for USD & US equities. However, our view is that there is more scope for disappointment.
EUR/USD opened with a negative gap on Monday and continued trading lower during the Asian morning. The pair fell below the key obstacle of 1.0800, the lower bound of the longer-term sideways range, to hit support at 1.0770.
Will Trump make the US dollar ‘great again’? Investors keep speculating over the possible effects of ‘Trumpenomics’. They have been betting on higher US inflation, possibly due to more government spending and increased tariffs. Higher inflation means the Fed may have to raise rates faster than previously. This explains USD strength after the election.
High volatility continues in many markets. Oil price jumps on news that US oil production fell in August and is likely to keep falling.
WSJ’s Fedwatcher says FOMC might not vote to hike rates next week.
PBOC trying to force CNH and CNY to converge so that CNY can be included in SDR; suggests that they will aim for continued stability.
These reports encourage “risk on” behavior: stocks rise, oil- and commodity-related currencies fare best.
Dollar falls all around, including vs EUR, perhaps on rate view?
BRL is worst-performing currency after S+P downgrade the country’s debt to below investment grade with negative outlook
Risk comes back into fashion as stocks rose in Europe and US; commodity prices rebounded, including copper & oil. Commodity and oil-related currencies also gained the most, while safe-haven JPH and CHF lost ground
Mixed NFP brings no further clarity. Headline payrolls number misses expectations, falls below 200k but unemployment rate falls more than expected, average work week increases. Net net, Fed rate expectations unchanged until July 2016 = no change in market view. Stocks & commodities fall as investors trim risk; may recover today. The big move Friday was in stocks and commodities, which fell as US investors reduced risk ahead of the long weekend & reopening of China markets. China stocks trading higher today after reassuring comments by Chinese officials at the G20 meeting. This could bring about some recovery in risk appetite, which would be EUR-negative, AUD & NZD positive