Trump administration will struggle to push through further tax reductions

David Morrison  |  November / 3. Week
Early last week the dollar came under selling pressure as traders expressed their uncertainty ahead of the US midterm elections. It continued to weaken after the Republicans increased their majority in the Senate, but lost control of the House of Representatives. This leaves Congress gridlocked which for one thing means that the Trump administration will struggle to push through further tax reductions or make cuts to business regulations. The EURUSD briefly hit 1.1500, sterling/dollar  bounced to 1.3170 while gold topped $1,240 for the first time since July this year.

But the dollar began to recover as investors factored in the positives of gridlock – mainly that it ensures the status quo by reducing the opportunities for politicians to make sweeping changes to policy.
The dollar got a further boost from a hawkish FOMC statement which followed the US Federal Reserve’s monetary policy meeting. The Fed kept rates unchanged as expected, but signalled that it would be tightening again next month.
 
At the start of this week the dollar rallied further. The EURUSD has smashed below its summer low of 1.1300 to trade at its lowest level in 17 months. Investors are pricing in the continuation of Fed rate hikes while handicapping the euro as Italy faces crunch time with the European Commission concerning its deficit-busting budget proposals. Meanwhile, sterling has fallen sharply across the board amid a reported cabinet rebellion against UK Prime Minister Theresa May’s Chequers plan for Brexit. Overall the outlook remains positive for the dollar but traders should keep a close eye on news flow.

Data-wise, Tuesday sees the release of UK unemployment numbers and ZEW Economic Sentiment surveys from Germany and the Euro zone. Wednesday morning sees the release of Chinese Fixed Asset Investment, Industrial Production and Retail Sales. Later on, we have UK and US CPI, and Euro zone Flash GDP. On Thursday we have Australian Unemployment, along with UK and US Retail Sales.
 
We also have speeches from Fed Chairman Jerome Powell on Wednesday and Thursday, then on Friday we have Bank of England Inflation Report hearings and a speech from ECB President Mario Draghi.
 
Have a great week!

Other Weekly Views

  • Sterling steady ahead of vote
    David Morrison  |  January / 3. Week

    Sterling has managed to hold on to last week's gains ahead of Tuesday's key Brexit vote. Meanwhile, gold is back in favour with investors

  • Powell responds to market volatility
    David Morrison  |  January / 2. Week

    US/China trade talks, strong payrolls and dovish comments from Fed Chairman Jerome Powell lifts equities and US Treasury yields while dollar slips

  • Dollar strong as 2019 gets underway
    David Morrison  |  January / 1. Week

    The first trading day of the New Year has seen the US dollar soar and equities decline. Meanwhile, gold seems to be back in favour with investors

  • Key Week Kicks Off
    David Morrison  |  December / 4. Week

    The US Federal Reserve meets on Wednesday and is expected to raise its Fed Funds rate by 25 basis points

  • Brexit Vote; Is it End or Just the Beginning ?
    David Morrison  |  December / 3. Week

    After five days of intense debate, on Tuesday the UK Parliament will vote on the withdrawal bill negotiated between the United Kingdom and the European Union.

  • Busy Week Ahead
    David Morrison  |  December / 2. Week

    On Saturday we heard that the US and China had managed to reach a tentative agreement over trade. As a result, President Trump has said that tariffs on Chinese imports to the US will stay at 10% for the next 90 days instead of being raised to 25% on January 1st as previously threatened

  • Fed Speaks Markets React
    David Morrison  |  November / 5. Week

    European and US equities were sharply higher early Monday. Investors were cheered by an apparent thaw in EU-Italian relations, a recovery in oil and hopes of a US/China trade breakthrough

  • Stock indices bounce back
    David Morrison  |  November / 4. Week

    European and US equities were sharply higher early Monday. Investors were cheered by an apparent thaw in EU-Italian relations, a recovery in oil and hopes of a US/China trade breakthrough

  • US dollar lost ground as November began
    David Morrison  |  November / 2. Week

    After a dismal performance in October, last week saw gobal equity markets rally sharply into the month-end.

  • Economic Calendar
    David Morrison  |  October / 5. Week

    On Wednesday the Bank of Japan kept its key interest rate unchanged at minus 10 basis points and its target for 10-year JGBs unchanged at zero. The Nikkei closed 2% higher while the yen was pretty much unchanged in the session.

  • ECB Takes Centre Stage
    David Morrison  |  October / 4. Week

    The US dollar continues to be in demand as investors look for safe-havens amid the carnage in global equity markets.

Show More Other Weekly Views

Sentiment

Open a Demo Account Open A Live Account

Losses can exceed deposits

Market Insight's Views

Market Insight analyses will provide both fundamental and technical comprehensions on FX
and other asset classes for Market Insight viewers

RISK WARNING

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.

If such information is acted upon by you then this should be solely at your discretion and GKFX will not be held accountable in any way.

  • ForexF
  • IndicesI
  • CommoditiesC
        Back

        Login to Market Insight Account

        Your Market Insight account gives you access to the tools that we offer our customers including our
        Technical Studies & Sentiment for your accounts.

        Forgot Password?

        Don't you have a Market Insight account? With a few easy steps you can easily register to Market Insight

        Create a Market Insight's Account

        Your Market Insight account gives you access to the tools that we offer our customers including our Technical Studies & Sentiment for your accounts.

        register_ty

        Thank you!

        Welcome to Market Insight family!

        You have succesfully completed the registration.
        We will send you an e-mail to give you some
        instructions and our Terms and Conditions!
        Our account representatives will be contacting you as
        soon as possible. If you have any further questions
        please do not hesitate to mail us via info@marketinsight.com