Gold 1780,725
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EURUSD 1,2108
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DJIA 33978,50
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OIL.WTI 61,795
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DAX 15289
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Last trading week was marked by Biden’s high-profile statements about a new tax policy in the USA. These announcements panicked stock markets immediately after the Wall Street Journal article was published. All major indices sold off as capital gains will be the first to be affected.
Dow Jones
What is the purpose of this tax reform? Biden’s first aim is to reduce the difference between taxes on income and taxes on income from financial assets. Because of the strong growth in the value of companies, as well as increased income from financial instruments, the capital gains tax rate could double, clearly hitting the wallets of the rich.
Biden’s second goal is to sort out public finances and increase government revenues. The treasuries reacted very quickly to this move with a positive increase.
What will happen to the markets after such innovations? There is no official release yet, the markets haven’t priced these changes in, but they will definitely do so when they wait for the publication. Therefore, a definite sell signal is already forming now.
Also in the medium term, this asset type is becoming less attractive to large and foreign investors. Investments in the economy are likely to slow down, which should have a negative effect on the value of the US dollar as well.
There is no positive news at all for the dollar to strengthen at the moment. Strong growth in retail sales in the UK as well as good PMI data in the EU do not give it a chance. Therefore, we should expect the Euro and Pound to strengthen against the USD in the near future.
It is more likely that such a Biden tax plan will reduce the risk of overheating the US economy and a strong rise in inflation. Therefore we are unlikely to see a positive speech for the USD at the next Fed meeting and the bailout policy will continue.
09.00 IFO economic expectations index in Germany for April
14.30 US Durable Goods Orders for March
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