A quiet economic calendar has left traders to focus on predominant events in the markets, mainly: The state of fiscal policy reform in the United States, and how that may impact the Federal Reserve’s rate hike timeline will impact the Brexit negotiations. The incoming polls of the first round of the French presidential elections are also expected to affect the current conditions of the Market.
A rate hike is becoming more and more evident for the U.S. dollar, that any fiscal stimulus-driven inflation is unlikely any time soon. U.S. Treasury Secretary, Steve Mnuchin, who had previously laid down a marker for a tax reform to materialize before Congress goes on their summer recess in August, has now backed off that goal. Instead, investors are now forced to wait for the Q4 2017 report before anything certain could come into fruition. In Turn, traders are discounting the possibilities of infrastructure spending well into 2018.
The Euro has been buoyed by the commentary from the various ECB policy officials. Chief Economist Peter Paet was of those who made a notable point, was one of the analysts who are signaling that downside risks to the Euro-area have dissipated, which will allow for a gradual removal of stimulus later on this year. While no rate hikes should be anticipated, the fact that there won’t be any further rate cuts is a sign that the floor may be in under European sovereign yields.