Global markets and the U.S. dollar are signaling a positive start to the second fiscal quarter of 2017, but early gains could hinge on President Donald Trump’s meeting with Chinese President Xi Jinping later this week.
Asian markets closed in the green Monday, with Japan’s Nikkei, Shanghai’s Composite Index, and Hong Kong’s Hang Seng all posting marked gains. European stocks graced a 16-month high Monday morning, with UK’s FTSE 100 and Germany’s DAX looking to mimic Asia’s performance.
The U.S. dollar rose against a basket of six rival currencies last week. The dollar’s gains came after weeks of Federal Reserve officials hinting at further interest rate increases, proposing as many as three more before the end of 2017.
The U.S. stock market has been on a near four-month high since Trump defeated former Secretary of State Hillary Clinton for the presidency. Investors expected the president to push an array of pro-growth economic policies within his first 100 days in office, but the recent defeat of the American Health Care Act has raised some doubts about Trump and Republican leadership’s legislative acumen.
Trump is scheduled to host Xi at Mar-a-Lago later this week. The president believes the meeting will be “difficult.” Trump is right to characterize the upcoming meeting that way, as China is one of the nation’s fiercest competitors in trade and international affairs. Expectations for trade and international monetary policy hang in the balance. (RELATED: Trump’s Meeting With Xi Jinping May Be More ‘Difficult’ Than He Thinks)
Investors will be watching to see whether Trump, or any of his affiliates, move to label China as a currency manipulator. If that happens, one could expect the U.S. dollar to take a hit.
“The meeting between Trump and Xi is very important because if they can form some sort of mutual interest, it will be in their mutual benefit, however, if the differences grows even further, then it spells more problems for the dollar,” Naeem Aslam, chief market analyst at Think Markets U.K., told reporters.
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