Obamacare repeal bill: Defeat or Delay? - Swissquote

Peter Rosenstreich, head of market strategy at Swissquote Bank says judging from the thin, directionless flows in Asia, investors will have to wait for the outcome of today’s vote on the Obamacare repeal bill for the market's next move.

Key Quotes

"So far, the market has hyped this event as being a test of US President Trump's policy agenda, suggesting that a defeated healthcare bill would translate into barriers for the much-awaited tax reform policy and broader pro-growth agenda. As suggested in yesterday's report, we concur that short-term volatility will be driven by the result of this afternoon’s vote. With the Republican opposition needing less than 22 members to vote against the measure (reports suggest that 24 members are prepared to obstruct), we believe that the bill will be rejected (if the bill reaches the floor and is not delayed)."

"Interestingly, Republican conservatives are already shifting the blame away from President Trump to Speaker of the House, Paul Ryan. However, regardless of the outcome, Fed monetary policy will provide investors with a clear directional view. The weaker dollar has created looser conditions, while political uncertainty has forced investors to fade expectations due to the steeper Fed policy path (June hike is now 50/50). Amid falls in real yields and signs that the Fed will be willing to tolerate higher inflation to ensure growth is stable, risky asset should continue to outperform. Today, Fed Chair Yellen will provide additional insight into monetary policy strategy. We expect that she will reaffirm the central bank’s slow and steady approach to tightening, decelerating the economy without spooking financial conditions. Given this outlook, we maintain our stance that further risk accumulations will favour EM currencies (ZAR, ILS, PLN and INR long continue to build)."