The dollar looked poised to finish its best weekly gain of the year with a whimper, fluctuating before edging lower as investors continued to weigh the prospects for tax cuts in the world’s largest economy. European government bonds rebounded from the recent selloff.
Equities in the region drifted even as they headed for the best month this year, after stocks in Asia followed the S&P 500 higher earlier. Treasuries were steady after a selloff that saw yields jump 18 basis points this week, the most since Donald Trump’s U.S. election victory in November. Emerging-market assets rallied, with stocks rising and most currencies strengthening against the greenback.
Trump’s tax plan, which still needs approval from Congress, currently lacks detail, leaving investors guessing which parts of the package will be prioritized by the administration. That appears to have persuaded them to pause the some of the recent reflation trades for the time being. Though with the chances of higher U.S. interest rates by the end of the year now at about 65 percent, they have driven equities higher and taken money out of gold, which was on track for its worst month this year.
Meanwhile, data out of Europe underscored the region’s economic recovery. German unemployment fell to a record low in September, providing encouragement for the European Central Bank as it contemplates reducing asset purchases in coming months. The U.K.’s benchmark stock index was buoyed by data showing that British consumers are in better shape than previously thought, with savings up in the second quarter and incomes rising faster than prices for the first time in a year. - Bloomberg -