The US Senate unexpectedly easily adopted its budget for 2018, but the most important factors, as always, are in the detail. The fact is that the budget contains such indicators that will allow us to start discussing fiscal incentives, namely, the speedy implementation of the tax reform, which Trump had promised. Of course, there are nuances, and most likely, they will appear in the course of further discussion of the tax reform. However, market participants believed in the development of a favorable scenario for tax reform, and began to actively sell American debt securities, and then the global debt market. Against this background, the dollar index has steadily strengthened, and most likely, this week, this strengthening is set to continue.
An interesting struggle between bulls and bears takes place in the main currency pair EUR/USD. Prices for this currency pair are extremely volatile. As soon as the bulls in the European currency begin to win, they immediately have to surrender their positions, retreating to old values. The fact is that the alleged tax cuts for corporations in the US will unquestionably give a price advantage for American goods. Realizing this, European officials make verbal interventions on the account, as for their European companies it is necessary to adopt a similar bill to the US, which in turn immediately reflects the growth of quotations of the European currency. In one word, the pair EUR/USD – “swings”. It is important to note that the Chairman of the Cabinet of Ministers of Spain, Mariano Rajoy, dismissed the president of Catalonia, Carles Puigdemont and his entire government, and we can say that there is no political negative for the European currency at present.
October 26, the publication of the ECB’s decision on the basic interest rate will take place, and if there is no drastic change in monetary policy, then the EUR/USD pair should wait for trade in a broad price corridor.
It should also be noted that if tax incentives are implemented in a short time, this will cause inflationary expectations to rise, which in turn will force the US Federal Reserve to tighten its monetary policy more aggressively, and then the US dollar will grow more rapidly. Against the background of events, the US stock market is covered by a euphoria. In the reviews of August 29 and September 19, the growth of American indices was expected to continue, and those who were acquainted with this point of view managed to earn on the continued growth of US stock indices. We wish you profitable trading!