Why the markets react so strongly to Gary Cohn resignation?

The resignation of US economic adviser Gary Cohn has plunged the stock markets globally, at the same time raising JPY and lowering USD. His decision comes as a result of losing the battle with other White House politicians, against the imposition of import tariffs on steel and aluminum. In addition to worries, Trump added that he is considering a wide range of import tariffs on Chinese goods.

If we thought, three days ago, that the US is only considering import tariffs, we are now sure that this will happen.

Here's what will follow in the coming days

Without any doubt, in the next few days we will see increased volatility in the markets as investors will begin to weigh the worst scenario of a trade war. The most important thing we are interested in as a trader is how he will turn the rest of the world to Trump's intentions. If we see a hit in the form of import tariffs by large importers of US goods, the markets will definitely go into correction. If, however, reason prevails and we have no responses, what we will observe in the indices will be a strong caution and, most likely, a wide range near the peaks.

What's next about interest rates and USD?

It is important to note that FED does not like insecurity at all! If Trump decides to make all his chores, the raise in interest rates this year will be severely reduced. This, in turn, will lead to weakness in the dollar and will somewhat support the stock markets. There is currently no strong gold gain, but weak dollar and increased uncertainty will definitely make investors hedge their portfolios.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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