Brazil’s Finance Minister Fernando Haddad announced on Wednesday that the government has concluded discussions on new fiscal measures to stabilize the nation’s finances.

The reforms aim to mitigate the risks posed by global economic uncertainty, amplified by the recent US presidential election of Republican Donald Trump, and to reassure investors amid increasing budgetary concerns.

The real and interest rates react

Following Trump’s election victory, the Brazilian real plunged more than 1.7% against the US dollar, while long-term interest rates surged.

These sharp market reactions reveal investor concerns over the anticipated US policy shifts under Trump, who is expected to implement higher import tariffs, extensive tax cuts, and stricter immigration rules.

Such policies are projected to strengthen the US dollar and drive up American interest rates, potentially pulling investments away from emerging markets like Brazil.

Acknowledging these developments, Haddad noted the impact of heightened global tensions, fueled by Trump’s campaign rhetoric.

However, he highlighted Trump’s relatively moderated tone in his post-victory speech, which suggested a shift toward a more pragmatic approach to foreign relations.

‘Need to focus on our own house’

Faced with volatile international conditions, Haddad emphasized the importance of internal economic management to shield Brazil from external disruptions.

“We need to focus on our own house,” he told reporters.

“Taking care of Brazil, our finances, and our economy will help minimize the effects of external shocks, regardless of the global scenario.”

As US policy changes unfold, emerging markets are particularly vulnerable to currency devaluation and inflationary pressures, especially if capital flows increasingly favor the US.

As part of Brazil’s fiscal reform plan, President Luiz Inacio Lula da Silva has urged coordinated action across government departments to ensure fiscal sustainability.

According to Haddad, “All ministers are well aware of the need to reinforce the fiscal framework to provide predictability and ensure long-term financial stability.”

This collaborative approach underscores the government’s commitment to balanced budgets and economic predictability, essential to fostering a climate that attracts investors and supports steady growth.

The new fiscal measures are designed to promote budgetary discipline, bolstering the country’s defenses against both domestic and international financial pressures.

Overall, as Brazil grapples with the consequences of the new US administration, the government’s commitment to fiscal reform demonstrates a desire to protect the country’s economic future. While external causes remain unknown, prioritizing internal stability will be critical in managing the complexity of a shifting global economic landscape.

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Donald Trump’s return to the White House marks a historic win. He is now only the second president, after Grover Cleveland, to serve non-consecutive terms.

Trump’s victory signals a likely shift in US policy, as his administration eyes tax cuts, immigration restrictions, and sweeping trade tariffs.

While equity markets, the dollar, and Treasury yields have shown optimism leading up to his win, his agenda’s economic and market impacts will hinge on the swift approval of his policies in Congress.

With Trump’s second term on the horizon, investors are keenly observing how far he will go with his proposed economic interventions.

It should be noted that while Trump plans a revisit of his signature policies, their impact may differ this time around.

The economic landscape has shifted since the COVID-19 pandemic, which triggered a surge in inflation that may not be fully under control.

There is also a question of how far will he go to deliver on his poll promises.

However, if his administration replicates his election rhetoric, the policies could carry significant economic risks, particularly for the national debt, with far-reaching implications for growth and market stability.

Addressing debt ceiling tops immediate priorities

The national debt has risen significantly since Trump took office in January 2017, with both parties contributing to heavy overspending.

Upon taking office, Trump’s first major challenge will be handling the US federal debt limit, set to reset on January 2.

Treasury Secretary Janet Yellen plans to deploy “extraordinary measures” to keep the government functioning, but Trump’s administration will face a tight deadline to negotiate budget adjustments and raise the debt ceiling.

With Republican control of both the Senate and House appearing likely, analysts expect a smoother path for his fiscal plans.

However, if Democrats secure the House, Trump may face challenges to his tax-cutting agenda and broader policies.

Domestic agenda: tax cuts and tighter immigration laws

Trump’s primary focus is likely to be on domestic policy, echoing the “America First” platform that characterized his first term.

His main goals include extending the 2017 Tax Cuts and Jobs Act (set to expire in 2025), reducing corporate tax rates, and exempting tips from taxation.

A Republican majority in Congress would simplify passing these measures, but resistance from a Democratic-led House could lead to delays and modifications, especially regarding corporate tax cuts.

Immigration is also expected to be a top priority. Trump’s plans emphasize tightening immigration laws, cracking down on illegal immigration, and limiting legal migration.

However, reduced immigration and extensive tariffs could challenge the US economy in the medium to long term, analysts at ING Think said.

The US labor force growth has increasingly relied on immigrant workers, who now make up 19.5% of the workforce.

If immigration is curtailed, sectors such as agriculture may face severe labor shortages, driving up wages and fueling inflation.

While aimed at boosting job opportunities for American citizens, these policies could have long-term impacts on the labor market, particularly in industries reliant on immigrant labor, such as agriculture.

Phase two: trade tariffs on China and other global imports

Once domestic issues are underway, Trump is anticipated to focus on trade policy.

His administration plans to impose aggressive tariffs, with a potential 60% tariff on Chinese goods and 10-20% tariffs on imports from other countries.

This protectionist approach aims to encourage American production and reduce reliance on imports.

However, the phased introduction of these tariffs, expected by late 2025 or early 2026, reflects the risk of economic disruption, ING Think said.

China would likely face tariffs first, followed by other nations in a staggered rollout.

While US manufacturers might benefit from reduced foreign competition, tariffs raise the risk of price increases for consumers.

Historical data shows that tariffs on products like washing machines led to significant consumer price hikes.

If tariffs are extended broadly, inflation could rise, and consumer spending could decline, potentially impacting the broader economy.

Additionally, retaliatory tariffs from affected countries could harm US exporters, complicating Trump’s goal of creating jobs through protectionist measures.

Near-term growth but long-term challenges

Trump’s pro-business policies, particularly tax cuts and reduced regulation, are expected to fuel optimism among investors and high-income households.

With less tax pressure, high-income earners are likely to maintain strong consumer spending, which has been a key growth driver.

Companies, too, may start investing again as regulatory uncertainty clears, potentially boosting capital expenditures.

However, tariffs on imports will likely raise prices for consumers and add costs for US manufacturers dependent on foreign components.

Trump’s fiscal policies also threaten to increase the national debt significantly.

The bipartisan Committee for a Responsible Federal Budget estimates that his proposals could add $7.75 trillion to the debt over the next decade.

This fiscal expansion could pressure the Federal Reserve to raise interest rates, potentially offsetting the growth benefits of his tax cuts and increasing borrowing costs for businesses and consumers.

A report by Barron’s notes,

Those close to Trump often point to the 2016-era adage that he should be taken “seriously, but not literally.”

He wants a strong economy and a favorable legacy, they say, and would adjust course if, for instance, an aggressive tariff agenda appeared to threaten American prosperity, the report says citing people close to him.

Overall, analysts believe that while the near-term growth outlook appears positive, the more aggressive Trump becomes with fiscal and immigration policies, the greater the long-term challenges for the US economy.

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With Donald Trump reclaiming the White House, ESG (environmental, social, and governance) fund managers are bracing for a renewed wave of GOP-led opposition.

Trump’s return is expected to energize conservative campaigns against ESG investing, and legal risks for these funds are set to intensify.

The impact of Trump’s win on green sector stocks was immediate, with shares in wind energy firms among the first to fall.

Analysts at Jefferies Financial Group Inc. have now advised ESG managers to ensure legal expertise is readily available.

“We’d encourage all ESG fund managers to have a lawyer on the team, or on speed-dial,” noted Aniket Shah, a lead analyst at Jefferies.

According to the firm’s report, ESG fund managers must now navigate a legal landscape that lacks precedents but is ripe for antitrust and fiduciary duty scrutiny.

Republicans’ anti-ESG stand

The Republican party has long criticized ESG initiatives, alleging that financial firms using ESG metrics may be colluding against the fossil-fuel industry and pushing up inflation.

During a House Judiciary Committee hearing in June this year, Republicans claimed that fund managers and pension funds are collaborating with climate activists as a “climate cartel” to pressure US companies into reducing fossil fuel consumption.

Jim Jordan, R-Ohio, stated that this coordination restricts trade and raises costs for consumers, including food and fuel, even if intended for environmental causes.

Besides, state treasurers in Republican-led states have withdrawn public funds from firms linked to ESG, including major investment companies like BlackRock and State Street.

Additionally, Republican legislatures in at least 20 states have implemented various anti-ESG regulations.

This scrutiny has led many ESG-driven companies to take a more conservative stance.

Jefferies analysts predict that companies will reduce ESG-related disclosures to avoid scrutiny—a practice referred to as “greenhushing.”

Legal concerns reshape corporate strategies

Beyond fund managers, corporate CEOs are also expected to adjust their ESG strategies, consulting with general counsels to manage the risks of pursuing environmental or social goals.

“General counsels are in the ear of CEOs, frightened about legal retaliation to ESG initiatives,” Jefferies analysts stated.

Some experts argue that pressure from consumers and employees could still drive companies to take a public stance on social issues.

However, Jefferies analysts clarified that while the “ESG” label may face backlash, the broader clean energy transition remains a separate discussion.

For ESG advocates, Trump’s return marks a potential setback, but analysts suggest that strategic, legally grounded approaches could help funds and corporations navigate the shifting landscape.

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The GBP/USD exchange rate retreated for six consecutive weeks, reaching its lowest level since August 12. It has retreated by almost 4% from its highest level this year as traders focus on the US election and the upcoming Federal Reserve and Bank of England (BoE) interest rate decisions.

US bond yields jump after Trump’s victory

The GBP to USD exchange rate continued falling after US government bond yields surged to the highest level since July this year after the US election. The ten-year jumped to 4.47%, while the 5-year soared to 4.3%.

This performance was a continuation of what has been happening since September 11, when bond yields fell.

Bond yields rose after Donald Trump won the election on Wednesday. In his campaign, Trump focused on several issues like tax cuts, deregulation, and tariffs. Some of these measures, especially tariffs, will be highly inflationary, which could push the Fed to embrace a more hawkish tone in the future.

Some Trump’s policies could also lead to more geopolitical issues, which will be a positive thing for the US dollar.

Looking ahead, the next important catalyst for the GBP/USD pair will be the Federal Reserve interest rate decision, which will happen on Thursday.

Economists believe that the Fed will decide to cut interest rates by 0.25% in this meeting as it continues to engineer a soft landing for the American economy. The bank has already slashed interest rates by 0.50% in a previous meeting. 

Odds of another cut rose after the US published weak jobs numbers on Friday. According to the Bureau of Labor Statistics (BLS), the economy created just 12,000 jobs in October, while the unemployment rate remained above 4.0%. 

Bank of England’s decision ahead

The next important catalyst for the GBP/USD pair will be the Bank of England decision, which comes a week after Rachel Reeves unveiled her budget. The budget will have tax increases and more spending.

Economists expect that the BoE will also maintain a dovish tone in the coming meeting by cutting interest rates by 0.25%. 

It hopes that these cuts will lead to a stronger economic recovery in the coming months. Besides, recent data has showed that the economy was doing much better than expected. 

For example, the economy expanded in August after contracting in the previous two consecutive months. Also, the manufacturing and services PMIs have remained above 50 in the past few months.

At the same time, UK’s inflation has continued falling and moved below the 2% target zone. The closely-watched services inflation has also continued moving downwards. 

Therefore, a BoE cut will likely not have a major implication in the GBP/USD pair since it has already been priced in by market participants.

Analysts at ING expect the bank to cut, with seven members supporting it and two opposing. If this happens, they see the GBP/USD pair falling by just 50 pips. They wrote:

“Given that interest rate markets since mid-September have re-priced the BoE landing point some 75bp higher, we think upside risks to sterling from BoE communication are quite limited. Instead, a BoE staying focused on the easing cycle this week could see sterling correct lower.”

GBP/USD technical analysis

The four-hour chart shows that the GBP/USD exchange rate has been under intense pressure in the past few weeks. It has dropped from a high of 1.3435 in September to the current 1.2925. 

The pair has constantly remained below the 50-period and 25-period moving averages, implying that bears are in control.

It has also moved below the 61.8% Fibonacci Retracement point. Also, it has formed a small double-bottom pattern at 1.2843.

Therefore, there is a likelihood that it will stage a comeback as the Trump election fears ease. If this happens, it could rise to the key resistance level at 1.3050, its highest point on November 6.

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When the Federal Reserve wraps up its latest meeting on Thursday, investors anticipate a notable, though predictable, outcome: a 25 basis point interest rate cut.

This decision aligns with efforts to recalibrate monetary policy as economic data points to moderated inflation and a cooling job market.

Yet, while the cut itself is expected, the spotlight will shift swiftly to Chair Jerome Powell’s outlook on future Fed policies.

The backdrop of political change

The Fed’s meeting comes against the backdrop of an altered political landscape following Donald Trump’s dramatic return to the presidential scene.

Trump’s policy ambitions—tax cuts, heightened government spending, and protectionist tariffs—could pose complex challenges for the Fed.

During his previous term from 2017 to 2021, Trump’s economic approach kept inflation below 3%, despite aggressive fiscal measures.

Economists, however, caution that repeating such a playbook now might rekindle inflationary pressures.

Krishna Guha, head of global policy at Evercore ISI, predicted that Powell will seek to strike a neutral tone, maintaining the Fed’s tradition of staying apolitical.

Powell will likely indicate that the Fed needs time to evaluate the incoming administration’s plans and will adjust policy only when there’s clarity on actual implementations.

Powell’s balancing act: Immediate cuts and future paths

With a quarter-point cut on the table, the fed funds rate will move closer to 4.5%-4.75%, following last month’s 50 basis point reduction.

Traders are eyeing Powell’s post-meeting remarks for signals about the future.

The rate influences consumer loans and other forms of debt, indirectly impacting spending and investment.

Quincy Krosby, LPL Financial’s chief global strategist, said in a CNBC report that “everyone is on the lookout for future rate cuts and whether anything is telegraphed.”

Krosby noted that despite the Fed’s ongoing focus on tempering inflation, a crucial question remains: can Powell and his team declare victory on this front?

Unanswered questions and economic projections

One notable absence from Thursday’s announcement will be an updated Summary of Economic Projections (SEP).

This quarterly report outlines officials’ predictions for GDP, inflation, unemployment, and interest rates.

The next SEP release is due in December, which could provide more insight into how the Fed views the economic path amid evolving political dynamics.

Bill English, former head of monetary affairs at the Fed and current Yale finance professor, pointed out in the report that the term “terminal rate” may re-enter discussions if yields climb further without a clear link to growth.

English suggested that the Fed might consider pausing its rate adjustments soon to assess their impact on the economy, which remains resilient despite uncertainties.

Looking to 2025: market forecasts and future cuts

The future path of interest rates is murky, with market sentiment divided.

Fed funds futures indicate a potential target range drop to 3.75%-4.0% by 2025, a full percentage point below current levels.

Meanwhile, the Secured Overnight Financing Rate suggests a more conservative outlook, showing short-term rates stabilizing around 4.2% by the end of 2025.

This disparity reflects traders’ varied assessments of economic resilience and the influence of Trump’s policy ambitions on inflation and growth.

If inflation spikes again due to protectionist policies or fiscal spending, Powell and his team might need to rethink their current rate trajectory.

The bond run-off: a quiet, persistent strategy

Beyond rate adjustments, the Fed has been steadily reducing its balance sheet since June 2022, with nearly $2 trillion in bonds shed so far.

Powell has suggested that this process could continue even during rate cuts, though Wall Street anticipates the run-off may end by early 2025.

English highlighted that while the Fed has been content with letting this strategy quietly unfold, future adjustments could come under scrutiny.

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