Political fallout batters US dollar, boosts gold
The impact of domestic politics on markets leads this edition of Futures File, our weekly commodities roundup.
Dollar drops on Trump scandal
The U.S. dollar and stock markets plunged last week as political scandals swirled in Washington, threatening to derail the Trump administration’s agenda. After President Donald Trump’s election in November, the stock market and U.S. dollar have largely been climbing on expectations of a stronger U.S. economy, a friendlier tax environment, increased infrastructure spending and higher interest rates.
However, after the turmoil of last week, investors feared that political chaos may trump the GOP’s plans. Fearing a less effective government and slower economy, global traders dumped U.S. stocks and the dollar, fleeing instead to the perceived safety of gold, pushing it to a two-week high at $1265 per ounce.
Brazil bribes plague beans
As all eyes were on Washington this week, an even more ominous story broke Wednesday night in Brasilia, Brazil. Brazilian President Michel Temer stands accused of bribing government officials to keep quiet about an ongoing corruption inquiry. If the allegations prove true, Temer could become the third consecutive Brazilian president to fall prey to corruption probes.
The threat of a political firestorm and the government’s inability to implement its agenda caused investors to flee Brazilian stocks and its currency, the real, which collapsed over 7 percent on Thursday.
This move reverberated around the world, even striking at Midwestern farmers, who saw the value of their soybean crop drop precipitously. A weaker Brazilian real makes Brazil’s soybeans far cheaper on the global marketplace, which, in turn, forces U.S. prices lower as well.
Brazil is the world’s largest soybean exporter and the biggest competitor for U.S. farmers, and this news knocked soybeans to $9.43, the lowest price in over a month.
Opinions are solely the writers'. Walt & Alex Breitinger are commodity futures brokers with Paragon Investments in Silver Lake, Kansas. They can be reached at (800) 411-3888 or www. paragoninvestments.com. This is not a solicitation of any order to buy or sell any market.