The previous week was marked by fiscal turmoil in the U.S., which sowed uncertainty about the financial stability of the world’s largest economy. Both the equity and bond markets recorded significant losses, pointing to a reactivation of the “Sell America” sentiment.
Legislative developments will remain in focus this week: the U.S. Senate will take up both Donald Trump’s divisive tax bill—which has even split the Republican Party—and a landmark piece of legislation for digital assets regulating stablecoins. Additionally, markets await Nvidia's earnings and the Reserve Bank of New Zealand’s policy decision, making US500, Bitcoin, and NZDUSD the key instruments to watch.
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US500
Donald Trump’s “beautiful tax bill” sparked a wave of political controversy this week and contributed to renewed declines on Wall Street. The pessimism stemmed primarily from the bond market’s negative reaction to the bill, with yields reaching new highs amid concerns over the fiscal stability of the United States. The bill passed narrowly on Thursday by just one vote (215–214) and is set to go to the Senate this week. Potential continued infighting within the Republican Party may further fuel uncertainty and prolong the “Sell America” effect. Meanwhile, in the equity market, attention will shift to Nvidia’s earnings, which have recently been buoyed by high expectations as well as reports of new Trump-brokered deals with the UAE. These results could significantly impact index volatility.
Bitcoin
Legislative developments will also be front and center for the cryptocurrency market, as the U.S. Senate prepares to vote on the “Genius Act”—the country’s first attempt to regulate the stablecoin market. Although Bitcoin is not directly addressed in the bill, the potential legalization and increased issuance of dollar-based stablecoins could significantly boost liquidity in the crypto ecosystem. Should the bill pass Congress, the market may interpret it as a major step toward the institutionalization of digital assets in the U.S. For BTC, which is often traded in pairs with stablecoins, this could translate into greater capital flows and heightened volatility.
NZDUSD
The key event in the currency market will be the Reserve Bank of New Zealand’s decision on interest rates. The New Zealand dollar took a slight hit last week after the Treasury Department downgraded its economic growth forecasts. However, Antipodean currencies ended the week as some of the strongest performers within the G10, with the NZD also leading gains against the U.S. dollar in today’s session. The kiwi was supported by a rebound in retail sales (+0.8% q/q), indicating improving consumer sentiment. On the other hand, pressure on the NZD may return with an expected 25 basis point rate cut to 3.25%. Expectations for further easing remain high, especially given the government’s signals of weak economic growth risks, making the RBNZ’s commentary particularly important to watch.
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