A tidal wave of risk aversion has flooded the financial markets on Monday with global stocks under intense selling pressure after Donald Trump’s failure on healthcare reforms sparked concerns about his ability to move ahead with tax cuts and fiscal spending. Asian shares were mostly in the red amid the rising Trump jitters with European equities descending deeper into the abyss as participants scattered away from riskier assets to safe-haven investments. With the reflation trade receiving a heavy blow and uncertainty mounting over Donald Trump’s economic policies, Wall Street could be left vulnerable to further losses. The growing threat of Donald Trump’s market shaking promises on tax cuts and fiscal spending falling short of market expectations has left investors on edge with risk-off becoming a major theme.
Dollar pressuredas Trump trade fade
The Dollar has found itself under renewed selling pressure on Monday as concerns mount over Donald Trump’s ability to push through tax cuts and fiscal spending to elevate the US economy. Last week’s defeat to the healthcare bill has raised questions over the longevity of the Trump trade with sellers exploiting the renewed uncertainty to attack the Greenback further. Although the Dollar may remain supported in the longer term amid the improving confidence towards the US economy, the growing uncertainty over Donald Trump’s economic policy has left bears in firm control in the short term. Further Dollar weakness may be expected with the lingering effect of the Fed’s cautious attitude potentially capping upside gains. From a technical standpoint, the Dollar Index remains under pressure on the daily charts with the breakdown below 99.50 opening a path lower towards 99.00.
Sterling elevated by Dollar weakness
Sterling was uplifted higher during Monday’s trading session and this had nothing to do with a change of sentiment towards the vulnerable Pound but Dollar weakness. Despite the gains the Sterling has displayed this quarter, the uncertainty of Brexit may ensure weakness remains a recurrent market theme in the longer term with bears on standby to exploit the technical bounce to attack prices lower. While the recent CPI and retail sales report have somewhat boosted sentiment towards Sterling, investors should be under no illusion that the bearish bias has changed. With further weakness expected as the Brexit negations get under way this week, the current technical bounce on the GBPUSD could come to an abrupt end.
Commodity spotlight – Gold
The renewed concerns over protectionism, Brexit unknowns and Trump jitters have boosted Gold’s allure with the metal on route to concluding the quarter as a winner. Uncertainty is rapidly rising over Trump’s economic policies and this has caused investors to depart from riskier assets to safe-haven investments such as the Yen and Gold. With the live threat of Trump’s highly anticipated pro-growth policies falling below market expectations, risk-off may become the name of the game consequently uplifting Gold further. From a technical standpoint, Gold is turning increasingly bullish on the daily charts with a breakout above $1260 potentially opening a path higher towards $1260.