The U.S. dollar and stock markets plunged this week as political scandals swirled in Washington, threatening to derail the Trump administration’s agenda.
After President Trump’s election in November, the stock market and U.S. dollar have largely been climbing on expectations of a stronger U.S. economy, a friendlier tax environment, increased infrastructure spending and higher interest rates.
However, after the turmoil of this week, investors feared that political chaos may trump the GOP’s plans. Fearing a less effective government and slower economy, global traders dumped U.S. stocks and the dollar, fleeing instead to the perceived safety of gold, pushing it to a two-week high at $1,265 per ounce.
Brazil bribes plague beans
As all eyes were on Washington this week, an even more ominous story broke Wednesday night in Brasilia, Brazil.
Brazilian President Michel Temer stands accused of bribing government officials to keep quiet about an ongoing corruption probe. If the allegations prove true, Temer could become the third consecutive Brazilian president to fall prey to corruption probes.
The threat of a political firestorm and the government’s inability to implement its agenda caused investors to flee Brazilian stocks and its currency, the real, which collapsed more than 7 percent on Thursday.
This move reverberated around the world, even striking at Midwest farmers, who saw the value of their soybean crop drop precipitously. A weaker Brazilian real makes Brazil’s soybeans far cheaper on the global marketplace, which, in turn, forces U.S. prices lower as well.
Brazil is the world’s largest soybean exporter and the biggest competitor for U.S. farmers, and this news knocked soybeans to $9.43, the lowest price in more than a month.
Walt and Alex Breitinger are commodity futures brokers in Valparaiso. They can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.