Trump signed three memorandums yesterday; one to withdraw the US from the TPP (Trans-Pacific Partnership) negotiations, another one imposes a hiring freeze on federal workers except for military positions and in the case of national security and the third one, reinstates the so-called Mexico City policy.
The TPP, as it’s known, is a trade agreement with 12 Pacific Rim nations. It was never ratified by the U.S. because of congressional opposition but was strongly backed by the Obama administration. It would create a free trade area stretching from Japan to Chile, and it was seen as an effort to create a counterweight to China, which is not a party to the agreement. Obama struggled to sell many Democrats on the trade deal, in particular because of concerns about how the trade deal would impact American manufacturers and the US workers in that industry.
Even Hillary Clinton, the Democratic presidential nominee who pushed the TPP deal as secretary of state, backed off her support for the deal during the campaign amid pressure from the left.
Trump has said that he also plans to renegotiate the North American Free Trade Agreement, a free trade deal joining the US, Mexico and Canada (NAFTA = North American Free Trade Agreement)
These memorandums triggered mixed feelings for traders as concerns that the multilateral trade regime will see sharp changes under President Donald Trump from a proposed border tax to potential other actions on import tariffs, putting downside pressure on the USD. The mixed feelings and concerns started 2 weeks ago, and continued since Friday when Trump gave his inauguration speech saying his administration would put “America first” and also promised new roads, bridges and highways. But market sentiment was hit by the negative tone of the speech, which underlined uncertainty over how Trump will govern.
EUR/USD is currently trading at 1.07430, near a technical resistance level (50% fibo retracement starting from the support at 1.04).
The pressure on the USD also took the USD/JPY down to 112.5 in the intraday, and is currenty trading at 113.170.
Gold prices gaines as the future of the global trade regime is questioned. Currently trading at $1.214.
U.S. stocks edged lower on Monday as early moves by President Donald Trump highlighting a protectionist stance on trade gave investors cause to rethink the post-election rally.