US interest rate cuts 'more likely' and dollar rallies after Trump assassination attempt
Trump's odds of winning the election and the Fed cutting rates has gone up
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The US dollar has strengthened in the aftermath of the weekend's assassination attempt on Republican Presidential candidate Donald Trump, with the markets pricing in a now likely second term for the former president.
Investors have honed in on "Trump Trades" with analysts pricing in further tax cuts for higher earners and more tariffs.
Notably, experts are claiming the volatility from Trump's assassination attempt could make any potential interest rate cut from the Federal Reserve more likely
Similar to other central banks, the Fed has raised the US base rate to a rate between 5.25 per cent and 5.50 per cent.
Despite inflation easing, the financial institution has held off implementing any reduction in interest rates.
This comes as a relief to homeowners and other debt borrowers who have been counting on their repayment rates coming down in the near future.
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Donald Trump clutches face and ducks as SHOTS FIRED at ex-PresidentDONALD TRUMPA spokesperson for investment bank Saxo said: "The US dollar opened higher at the start of the new week following the assassination attempt on former President Donald Trump over the weekend.
"Markets have increased the probability of a second Trump presidency, and the Republican Convention will be in focus this week.
"As bond futures dipped during the Asian session, with bond cash markets closed for a bank holiday in Japan, investors seem to be focusing on the 'Trump trade' following the weekend assassination attempt.
"A Trump victory would likely lead to tax cuts, higher tariffs, and looser regulations."
Analysis from Saxo also broke down recent developments from the US Treasury.
The spokesperson added: "Ten-year US Treasury yields closed at 4.18 per cent on Friday, a crucial support level prior to the weekend's events.
"If yields fall below this level, the next support lies at 3.78 per cent. Conversely, there is potential for yields to rise to 4.47 per cent before encountering resistance.
"The US yield curve is expected to continue steepening, primarily driven by a decline in short-term rates as anticipation of an upcoming rate-cutting cycle grows.
"The assassination attempt on Trump may hasten a July Fed rate cut, especially if market volatility spikes.
"The Federal Open Market Committee meeting will occur shortly after the June Personal Consumption Expenditures (PCE) data release; if these data mirror the deflationary trends seen in recent Consumer Price Index (CPI) numbers amidst rising political uncertainty, a rate cut becomes more likely."
LATEST DEVELOPMENTS:
The central bank could slash rates next month
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For the 12 months to June 2024, the consumer price index (CPI) rate of inflation fell to 3.3 per cent.
If Trump wins the presidency again, he has promised to prioritise tax cuts but has cited his intention to introduce higher tariffs.
This has gave many pause for concern as tariffs increase the prices of imported goods.
Due to this, domestic producers are not coerced into slashing their prices from increased competition, and domestic consumers are forced to pay higher prices.