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Politics and Holidays Confuse Traders

By:
Barry Norman
Updated: Aug 21, 2015, 01:00 UTC

President Barack Obama and Republican congressional leaders remained deadlocked in talks aimed at reaching a deal before Jan. 1 to prevent steep tax hikes

Politics and Holidays Confuse Traders
Politics and Holidays Confuse Traders
Politics and Holidays Confuse Traders

President Barack Obama and Republican congressional leaders remained deadlocked in talks aimed at reaching a deal before Jan. 1 to prevent steep tax hikes and budget cuts that could push America into a new recession. This week’s change in Republican’s stance saying they would consider tax increases on Americans who earn over 1 million dollar per year, showed that these is room for negotiation. Lawmakers are expected to break for the Christmas holiday on December 21stand normally do not return until the first week of the New Year. President Obama has warned policy makers not to make plans for the holidays and he would keep congress seated until there is a deal. This is standard operations for the US, nothing to be surprise traders

The dollar index, which measures the greenback against a basket of six major rivals, edged lower to 79.552,and continues to remain weak over the weekend. The dollar fell from a near 9-month high against the yen and dropped for the fifth straight day against the euro, after a report on US inflation showed prices fell in November for the first time in 6-months, which should allow Federal Reserve to stay on its ultra-easy monetary policy path.

This morning markets are reacting to the weekend win of Liberal Democrats in Japan and Shinzo Abe the new Prime Minister. Abe’s party has won on an overwhelming victory, giving the lower house enough votes to push any policy that Abe’s party endorses through Parliament. The JPY is tumbling against all of its crosses as Abe’s economic policy would be huge stimulus and infrastructure projects.

German Chancellor Angela Merkel warned her European colleagues against premature optimism that the euro-zone debt crisis has been tamed, and urged leaders to stay the course on economic and fiscal policy reforms. European leaders agreed on last week, to press on with further steps to tackle their debt crisis but German Chancellor Angela Merkel threw out a proposal to boost risk-sharing with a fund to help euro zone states in trouble.

Chinese data was strong this week helping markets to trade on a more positive note. China scrapped a ceiling on investments by overseas sovereign wealth funds and central banks in its capital markets, part of government efforts to encourage long-term foreign ownership and shore up slumping equities. SWFs, central banks and monetary authorities can now exceed the $1 bn limit that still applies to other qualified FII.

IMF chief Christine Lagarde upwardly revised the Fund’s estimate of economic growth among developed nations, which she said would increase by 1.6% next year, up from an earlier estimated 1.5%. She told that developing countries should grow by 5.6%, while the global economy is expected to expand by 3.6%.

This week’s focus will remain the US Fiscal Cliff with this the last week before the Christmas holiday season. Next week will see a partial trading day on Monday, Christmas eve and markets closed on Tuesday for Christmas day. In the US most traders will combine the weekend into a 4 day holiday leaving markets quiet next week. Many traders will be closing out yearend positions and also looking for safety ahead of the holidays and unknown tax changes.

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