The Trump administration’s budget proposal, revealed last night, sent the US dollar higher against most of its G10 counterparts.
The plan includes a massive $US5.5 trillion cut in government spending over the next decade in an attempt to reduce the fiscal deficit. It also projected an increase in military and defence spending, which led to a surge in US aerospace and defence stocks.
As this budget will potentially reduce social welfare benefits for low-income groups, it is likely to face some dissent from Congress. On the other hand, if implemented, this proposal could encourage lower-income people to return to the jobs market and thus provide a sustainable, longer-term drive toward economic growth. The surge in the US dollar last night was probably a reflection of this assumption.
The outlook remains uncertain as to what extent this budget plan will be approved by Congress, so the equity markets reacted cautiously toward it last night. The Dow, S&P 500 and Nasdaq climbed 0.21%, 0.18% and 0.08% respectively.
Euro slumps on suicide attack in Manchester
The fatal bomb attack in Manchester on Monday sparked panic selling in euro and sterling after the UK Prime Minister raised the UK’s terror threat level from ‘severe’ to ‘critical’, late on Tuesday night. The UK election campaign was suspended as a result.
Technically, EUR/USD is still on an uptrend but is facing some technical pullback as the RSI and DMI shows signs of it being overbought. Its immediate support level could be found at the 1.112 area.
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