US Political Uncertainty Could Rattle Markets

Political risk has the potential to grip the currency market in the near term, according to one foreign exchange strategist with a close eye on Washington this week.

Concerns over a U.S. government shutdown loom. President Donald Trump was said to support a short-term funding bill to prevent such an event, but it faces potential “no” votes. Political unrest could rattle markets into the latter half of the week, said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management. Here are his reasons.

• While U.S. equities are continuing to make record highs, the dollar index has sunk to multiyear lows. The currency is particularly politically sensitive, and its price action is in response to concerns around U.S. policy.

• The government shutdown resolution may indeed fail to pass as tension across political parties remains.

• A further decline in the dollar could be a warning sign of weakness to come in stocks, though this was not evident on Wednesday as stocks ended in positive territory.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza