Expect a more hawkish Fed in the second half of 2017
Analysts expect Trump to be able to agree a tax cut package with Republicans, enabling US growth of 2.75 per cent this year
Markets should not underestimate President Donald Trump’s will to implement reflationary fiscal policies and should prepare for a more aggressive Federal Reserve and a stronger US dollar in the second half of 2017, analysts say.
Their advice comes despite the likely damping effect of Trump’s new immigration curbs on risk sentiment. On Friday he signed an executive order temporarily banning citizens from seven Muslim-majority countries from entering the US.
The markets are choppy ahead of the Federal Reserve’s first meeting of 2017, which starts on Tuesday, as expectations of a near-term rate increase fade.
The US dollar tumbled on Monday to its lowest level in nearly two months against its major rivals, with the WSJ dollar index retreating as much as 0.4 per cent to 91.07, after Trump’s immigration order prompted massive protests in the US and unsettled global investors. The Japanese yen, a traditional safe-haven currency, briefly jumped 0.7 per cent to 114.27 per US dollar.
Japan’s Nikkei 225 ended Monday down 0.5 per cent, while Australia’s S&P/ASX200 and New Zealand’s NZX 50 fell 0.9 per cent and 0.6 per cent respectively.
