Trump`s Fiscal Plan – Is It Really Coming This Week?
Skerdian Meta • 2 min read
This was supposed to be a big week. Everyone has been waiting for Trump´s big fiscal plan that he bragged about during his presidential campaign.
Last Friday Trump tweeted that he will unveil his tax plan this week, probably on Wednesday seeing as he wants to keep his 100 day promise. He also mentioned that there will be massive tax cuts for individuals and companies.
The tax cuts are a big deal because they affect all multinationals based in the US and almost all industries. Consequently, all their trading partners across the globe and their respective currencies will be affected.
Actually, this is supposed to be a big thing. Although we didn´t see much action on Friday afternoon when Trump tweeted it the big news,apart from a 30-40 pip jump on USD/JPY.
So, why didn´t we see any action during the last few trading hours on Friday and are we likely to see a massive move next week?
If we really see the final draft of Trump´s tax/fiscal plan next week, then I expect broad and massive volatility, but the market is not convinced.
First, knowing Trump and how much he loves publicity the market is not buying his tweet. Shortly before Trump tweeted his fiscal plan comment, Trump´s budget director and another official of his administration said that it´s too early for such a specific plan and that this will just be a list of some principles and priorities.
Now, even principles and priorities can swing the forex market because they give forex traders a taste of what´s coming up, although it might not actually come into play.
Second, even if we get the final draft, it will be extremely difficult to pass the bill through the Senate. Similiar to the health bill a few weeks ago, which failed to go through the Senate and turn into an actual law.
So, although we expect volatility in all financial markets (forex, indices, commodities etc) next week, we must remember that anything can happen.
The way I see this, your best bet is to trade as you go.
- We don`t know if there will be a real plan,
- We don´t know what this plan will be,
- We don´t know how much it is priced in
- We don´t know if it will go through
- We don´t know how much it will change on the way and what the final draft will be
We know that the market likes to get carried away by comments, but it comes to its senses sooner or later.
So, if we see a jump in USD after a comment which is not really justified then its best to fade the move. So, sell/buy the jumps or dives in USD pairs if there isn´t much meat to chew on in the “priorities and principles”.