Following the speculative rally by the equity markets and the U.S. dollar following the election victory of Donald Trump, nearly four months later, the markets have nothing to go by from President Trump.
Last week, the U.S. dollar fell below the psychological round number level of 100.00 as investors pared bets on the so-called “Trump Trade,” where President Trump is yet to make good on his election promises.
The skepticism among investors was evident as the majority of equity markets, both in the U.S. and abroad pulled back while the U.S. dollar eased back from its gains.
The obvious winner so far is the Japanese yen which is viewed as a safe haven asset. USDJPY broke past 112.00 last week, another key level in the currency pair and had been trading weaker ever since. The U.S president has promised tax cuts and $1 trillion in spending on the U.S. infrastructure construction but has failed to provide any further details so far.
In late February, the President tweeted that a new tax plan was to be announced towards the end of the month, but all of that failed to materialize.
Meanwhile, the U.S. Federal Reserve maintained its stance of two more rate hikes coming up this year. After raising the short-term Fed funds rate to 0.75% – 1.0% in early March, the Fed did not change the narrative thereafter.
The markets were slightly disappointed on the news as some expected that the Fed could increase the pace of rate hikes to three instead of two.
The above factors combined are likely to weigh on investors’ minds. However, the question that is likely to plague almost every investor would be whether this is a correction to the Trump trade that could see further upside or if this is just the beginning of a longer term correction.
Read more: https://www.orbex.com/blog/2017/03/trump-trade-buy-dip/