This morning US President Donald Trump will deliver his first speech to Congress, in which he will address a 10% - or $54 bn – increase in the defence budget in fiscal year 2018, and reveal plans to replace Obamacare.
The proposed defence budget, if approved, is going to be the biggest increase in spending since 2007-2008. The rationale behind the move is to combat the threats from a “dangerous world”, according to President Trump. However, this proposal represents another contradiction against his previous talk during his election campaign, of cutting military spending.
The White House will also send a broad budget outline to federal agencies on Monday, then the Trump administration will finalise a formal budget request to Congress by May.
Here is what we know so far:
- A $54 billion increase in defence spending for fiscal year 2018
- That increase will be offset by $54 billion in cuts to a variety of other domestic spending programs, including deep cuts at the EPA and State, especially hitting climate-change programs
- Medicare and Social Security will be spared from cuts
- A “big” announcement on infrastructure from President Trump
The US dollar index surged last night, as the prospect of a March rate hike spiked up to over 50% after Federal Reserve Bank of Dallas CEO Rob Kaplan told reporters that a tightening might come in the near future. If President Trump is going to announce a massive infrastructure plan or hint at a big stimulus package, then the market will have more reason to believe that the Fed will speed up the rate normalisation.
US Dollar Index Mar 2017
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