Photo: Win McNamee / Reuters
The dollar has lost almost all of the gains made after the election Donald trump President of the United States. Investors doubt that he will be able to implement a plan to stimulate the economy, halted the rally in the U.S. currency
The Failure Of Trump
Monday, March 27, the dollar retreated against all top ten currencies included in the Bloomberg Dollar Spot Index, futures on US shares fell before the opening of trading, as investors rushed to buy protective assets. So the markets reacted to another failure of an American President: he has failed to obtain from Congress the repeal of Obamacare healthcare program. Republicans in the house of representatives withdrew the bill because of an insufficient number of votes in support of it. The setback gave investors the skepticism that the President will be able to ensure the adoption of draft laws on tax reform and deregulation of the financial sector and thereby complete the remaining points of the campaign plan to accelerate the national economy.
This is evidence that the “factor trump” rally on the markets due to the high expectations of the new economic policy is eroding, and the mood of risk-off (flight risk) increase, write the FT and Bloomberg. Against this background, the market doubted that the fed will accelerate the tightening of monetary policy this year, said the FT. A bill to repeal the healthcare program Obamacare and replace it with a new one was withdrawn Sunday, March 24.
“The failure of trump, who was not able to achieve abolition of Obamacare in Congress, where he relies on the house Republican majority has caused some concern regarding its ability to implement the reduction of taxes and increase infrastructure financing, — quotes Bloomberg review OLE Hansen, a leading commodity strategist at Saxo Bank. — This failure to restrain stock rally in the coming months, reducing the need for further action from the fed”. As a result, the yield of dollar-denominated assets, stocks and bonds will decline, which is good news for investors looking at gold as an alternative, said Hansen.
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Markets expected that after the abolition of Obamacare trump will focus on tax reform. The basis of this optimism was the understanding that the savings from the abolition of Obamacare would provide a space for a “very significant tax reduction,” explained FT currency strategist Capital Markets STU Trin. Because of what happened in Congress in the coming week the dollar will not be a factor by which to reverse the current negative trend, the newspaper quotes the currency analyst Mitsubishi UFJ Financial Group Lee Hardman.
Photo: Lucy Nicholson / Reuters
Amid sales dollars investors rushed to buy protective assets such as gold, yen and Swiss franc. At the market prevailed a tendency of avoiding risk, said Reuters analyst provider trading services Forextime Lukman Otunga. The yen strengthened against the dollar by 1%, to highs since mid-November. The franc strengthened 0.8%, also up to the November high. The Euro gained 0.7%, to $1,087 as of 20:25 GMT on Monday. The demand for “protective” U.S. Treasury bonds: the yield on ten-year papers decreased by 6 b.p. to one-month low of 2.35%; the borrowing rate in the Eurozone also declined in terms of risk-weighted assets. Gold rose 1.2% to $1258,82, approaching the highest since November 10. Emerging-market currencies also strengthened.
The dollar index from Bloomberg, fell 0.4% on Monday night and broke below its 200-day moving average close below the curve could spell further weakness of the us currency, writes Bloomberg. The last time the index fell below the moving average about a year ago, and this was followed by a decline of 5.7% in two months, the Agency said.
“Trump is caused by the growth of the American currency and commodity prices risks to be fully offset,” said FT currency analyst at National Australia Bank Rodrigo Catril. “Investors are more cautious than in November, when the markets offered a more severe impact, — quotes Bloomberg words of James woods, investment analyst Sydney financial service providers Rivkin Securities. — Defeat with Obamacare complicates the adoption of tax reform and raises the stakes for market participants”.
Shares of U.S. banks, the maximum rising in price on trump’s victory over Hillary Clinton in November, fell at the opening of trading in new York, approaching the lowest since June of 2016. It is the banks, as expected, will benefit most from the promised trump deregulation of the financial sector. The KBW Bank Index, which includes shares of large banks fell 2.1%, down from March 1, is more than 10%. Paper Goldman Sachs fell 2.4% — the largest decline among the companies included in the Dow Jones.