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Forecast: Serious strengthening of US-dollar is expected

Forecast: Serious strengthening of US-dollar is expected
Tax reform will have serious impact on global financial markets

Baku. 23 October. REPORT.AZ/ Law on tax reform proposed by the US President Donald Trump during pre election campaign is expected to be submitted to Congress for voting in coming days.

Analytical Group of Report News Agency informs, the adoption of reform envelope will have a negative impact on the global economy and the financial markets. Notably, the adoption of the budget project of the 2018 fiscal year has increased probabilities that tax reform will be easily accepted.

Analytical Group said adoption of tax reforms in the US will lead to the creation of new jobs, which in turn, will lead to inflation acceleration.As a result, the Federal Reserve System (Fed) will continue to increase its discount rate.This will also strengthen the US-dollar.

Notably, due to excessive liquidity in the country currently US capital flows to foreign markets for high profits.

As a result of tax reform, it will be possible to increase the investment activity of local producers, repatriation of local capital and even attract foreign capital. This, in turn, will have a serious adverse effect on the emergence of capital flows from financial markets of developing countries.

Tax reforms will lead to a serious strengthening of US-dollar. Thus, acceleration of inflation will lead to increase in discount rate. The acceleration of capital inflow to the US will result in lowering the balance to absorb additional liquidity. Increased business activity in the U.S. will increase demand for the dollar.

Notably, financial markets' confidence in the US economy increased to 91.7% in December.

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