United States President Trump’s new tactic may restore USD strength and raise interest rates


Faced with a lot of pessimism about the prospects of Trump’s agenda, we have repeatedly explained the flexibility of the system of checks and balances. Many of the more extreme positions, such as China’s manipulative naming of currency, the promise to withdraw from NAFTA or Kurs, the restriction of immigrants and their entry into the United States, and the legislative power itself, which limited President Trump’s ability to impose New sanctions on Russia, Iran and North Korea.

The most significant change has taken place recently since elections and after the increasing frustration among Republican lawmakers, who, despite their majority, have ideological differences, hampering the administration’s agenda and putting Trump in a new crisis. Where the president now seeks, at least in some areas, to work with the Democrats, hoping to peel enough Republicans to form a majority. This has led to more time. Debt and spending limits were extended until mid-December to ensure the smooth financing of emergency aid after recent natural disasters.

 

This new course appears to extend in a few areas for each issue, including health care and tax reform. It may be premature to come up with any hard and fast conclusions, but the point is that the dance between the fractious and small Republican legislative majority, may make a dissident president, the democratic minority severely altered the rhythms, and many investors do not seem ready for this.

 

Given the prices, market positioning, and market psychology, we believe that the market is not prepared for any one of these scenarios: tax reform, the continued phasing out of Fed decisions of accommodation by increasing the target range of the Fed funds, and the reappointment of Yellen.

 

The tax reform is of great interest, despite its ambiguity at the moment. To clarify the picture, the disagreement among members of Congress on the different demands of the various parties must be resolved in order for the program to have a majority.

 

Today, the United States will witness retail sales reports. The weekly Redbook report on the chain’s sales could help offset some of the weakness in car sales. United States consumption remains steady after the first quarter of this year, boosted by job creation, the growth of small real wages and the increased use of credit accounts.

 

Expectations of interest rate hikes in December have risen in recent days as expectations of a hike in interest rates have returned, with investment forecasts rising to 51.5 %, and Bloomberg increased from approx.    27 % at the end of last week to nearly From 39 % this week. The odds could increase from 31 % to 46 % over the next week, suggesting that the USD index may regain gains.