Congressional Juggling:
The people of the United States have spoken! With both Trump’s Republican party and the Democrats claiming victory over the mid-term elections in the public eye, markets have been more decisive in the face of the ballot. The Republicans held control of the Senate, however, ceded power of the House of Representatives to the Democrats. Markets have interpreted the mid-term elections by undermining the value of the US Dollar, likely pricing in the increased degree of political gridlock that the United States will face in pursuing economic growth. For months, economists and strategists alike have been debating when will economic growth in the United States peak. Given Trump’s pro-market and pro-growth presidency, political headwinds prevent fiscally driven economic growth, increasing the impetus for Powell’s Federal Reserve to pause its interest rate hiking phase. Positively, with the House being controlled by the Democrats, Trump’s capacity to increase the United States’ extant burden of debt does limit the extent to which the White House could drift into fiscal profligacy. Italy’s spending plan remains in the foreground of the picture of Eurozone risk with signs of inflationary pressure in the Eurozone being overwhelmed by political instability. The Pound received a sustained yet light bid at market open as investors continue to orientate themselves towards a long-awaited Brexit deal.
Discussion and Analysis by Charles Porter
Weren’t Tariffs USD Negative? The Dollar proved sensitive to headlines regarding trade during the US overnight session. However, contrary to what many commentaries would have you believe, as the risk of tariffs escalated the Dollar rose. The 90-day pause following Trump’s April ‘liberation day’ tariffs had been set to expire this coming Wednesday. To the […]
Dollar Reserves With the passing of Trump’s original deadline for the reimposition of liberation day tariffs yesterday, markets have breathed a sigh of relief. July VIX futures continued to slide lower. Moreover, what may surprise anyone who had been expecting the issue of tariffs to resurface following the passing of Trump’s new deadline, so too […]
Big Girls Don’t Cry A bond market tantrum and one of the sharpest one day sell offs in Sterling for several years appear to have been catalysed by the Chancellor’s appearance in PMQs yesterday. First: the back story. This Labour government has faced some embarrassment in recent weeks trying to get its welfare bill through […]