Suddenly! Trump Tax Cuts Act Unexpectedly Failed, US Dollar May Face Price Crash Storm

Trump's tax cut bill was suddenly rejected by Congress, causing a significant drop in the US dollar index. On the afternoon of May 16th local time, the US House of Representatives narrowly rejected former President Trump's 2024 Tax Cut and Economic Revitalization Act, with a margin of 217:215. This immediately triggered a violent shock in the foreign exchange market.

As of the close of the New York foreign exchange market, the US dollar index plummeted 1.2% to close at 103.86 points, marking the largest daily decline in nearly three months.

The voting process for the bill underwent a dramatic reversal. According to our reporter's on-site observation, after 6 hours of intense debate, the previously favored tax cut bill ultimately failed due to the defection of 7 Republican lawmakers.

These legislators mainly come from high tax states such as New York and New Jersey, and they oppose the removal of state and local tax exemption caps.

Speaker of the House Johnson stated after the vote that a special task force will be immediately established to revise the bill.

The global foreign exchange market is experiencing severe fluctuations. Affected by this news, the euro/dollar surged 1.5% to 1.0892, while the dollar/yen plummeted 2% to 153.25. The onshore Chinese yuan closed at 7.1980 points, up 380 basis points from the previous day. Spot gold prices surged 2.3%, breaking through the $2400/ounce mark. The market reaction was strong, completely disrupting the market logic of the second quarter. Rick Reid, BlackRock's Global Fixed Income Chief Investment Officer, said, "Investors need to reassess the fiscal policy and economic growth prospects of the United States.

Goldman Sachs subsequently lowered its forecast for US GDP growth in 2024 by 0.4 percentage points to 1.7%.

Political influence continues to ferment | | | Trump posted on social media calling it a "betrayal within the Republican Party" and vowing to "clean up the door" in the November elections.

The White House Council of Economic Advisers warns that blocking the bill could lead to approximately $200 billion in corporate investment plans.

Future prospects | | | Technical analysis shows that if the US dollar index falls below the key support level of 103.50, it may further explore the level of 102.

JPMorgan recommends clients to increase their holdings of euros and gold assets to hedge against the risk of further weakening of the US dollar.

Expert advice | | | Export companies should immediately initiate exchange rate hedging operations | | | Investors can pay attention to safe haven currencies such as the Japanese yen and Swiss franc | | | Pay close attention to the speech of Federal Reserve officials on May 20th