After stocks and the dollar surged on Tuesday, following a Politico report that Trump’s team have taken a significant step on tax reforms, the President’s threats on Tuesday night to shut down the government and terminate the NAFTA agreement, were not well received by investors, who responded by dragging both equities and the dollar lower.
Less than a month ago the CBOE volatility index – known as the best indicator of fear in the markets – dropped to a record low of below 9. The declines were a result of steady equity markets, low trading volumes, and optimism that the markets were heading higher. This has all changed in the past two weeks, with the fear index rallying from a low of 9.52 to 17.28 – an 81% spike in 4 days from Aug 8 to Aug 11.
The U.S. dollar remained on the defensive early Thursday, after yesterday’s declines led by increased uncertainty over another U.S. rate hike in 2017 and President Donald Trump’s fiscal agenda after abolishing the Manufacturing Council and Strategy & Policy Forum.