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Economic undercurrents under US political polarization, bill disputes and future chess game of the US dollar index
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: Economic Undercurrents under the Polarization of the United States, Bill Controversy and the Future Chess Game of the US dollar index". Hope it will be helpful to you! The original content is as follows:
The American party www.xmserving.competition pattern is being reshaped by the "Big and American" bill and emerging political forces, and its influence extends along the economic chain to the Federal Reserve's interest rate decisions and the fundamentals of the US economy, ultimately affecting the US dollar index.
The bill tear apart the two parties, and the www.xmserving.competitive landscape changes
The "Big and American" bill focuses on tax cuts, military expansion, and social security reduction: continuing and increasing tax cuts (such as reducing corporate taxes, abolishing the "rich" taxes, etc.), significantly increasing military spending and border expenditures, but reducing the scale of Medicaid and food stamps, which is expected to push up the deficit by $3.3 trillion in ten years.
This bill intensifies bipartisan confrontation and partial division within the Republican Party. The Democratic Party www.xmserving.completely opposed it, denounced it for "robbing the poor and helping the rich" and using legislative means to delay the vote; there were significant differences within the Republican Party, traditional conservatives were worried that debt was out of control, moderates were worried that social security cuts would affect the election situation. In the end, three Republican lawmakers turned against each other and the bill passed the thrilling conclusion.
Musk's "American Party" "disrupts the situation" and affects the election results
Elon Musk opposes the bill and plans to form the "American Party" to target 2-3 Senate seats and 8-10 House constituencies in the 2026 midterm elections. Musk, who spent hundreds of millions of dollars on Trump's campaign in 2024, broke down against the Great and Beautiful Act, calling for the challenge of Republicans who support the bill.
The Marquette University poll shows that 40% of Republicans may support the American Party candidate, while only 25% of Democrats; Quinnipiac University poll shows that nearly half of voters are considering joining third-party parties, but only 17% are interested in Musk's party, and the potential Republican supporters are nearly three times that of Democrats.
Love in 2024In a congressional district in Holland, the gap between the two parties is only 799 votes (413,000 votes). If the "American Party" appears, the Democrats will regard it as a favorable situation and believe that it mainly attracts right-wing Republicans; the Republicans are wary of the impact of their financial resources on swing constituencies. However, the party faces restrictions on the electoral system (winner-takes-all rules) and regulatory obstacles, and its ultimate influence remains variable.
Politics is transmitted to the economy, affecting the direction of the US dollar
If the United States maintains current interest rates and implements the "Big and American" bill, it will have a significant impact on the Ministry of Finance and future governments.
The Ministry of Finance will face a spiral of deficit and debt. The deficit may increase by US$4.1 trillion in the next decade, the proportion of debt to GDP will rise to 127%, interest expenditure will surge, and annual interest cost may increase by US$100 billion to US$1.3 trillion, intensifying the cycle of "borrowing new and paying back old". Long-term Treasury yields may rise due to market concerns, pushing up financing costs and increasing fragility in debt structures. The US international credit and US dollar status may be eroded. If a cross-party consensus cannot be reached, the economy may be in trouble.
The US international credit and US dollar status are challenged and will directly threaten the US dollar index. Interest rates are also directly related to the US dollar index. High interest rates attract capital inflows and support the strengthening of the US dollar; interest rate cuts weaken the attractiveness of the US dollar. The current partisan dispute has led to an increase in policy uncertainty, and the Fed needs to weigh the trade-off between inflation and growth, which is becoming an invisible driving force for the fluctuations of the US dollar index.
Future Outlook
The current annual interest cost of the US Treasury Department’s deficit has exceeded US$1.2 trillion. This figure is not only a microcosm of fiscal imbalance, but also a concentrated reflection of policy dilemmas. The superposition effect of high interest rates and the expansion of debt scale. If the government cannot effectively control the deficit and repair fiscal sustainability in the future, interest costs may further erode people's livelihood expenditures and economic growth potential, and ultimately threaten the credit of the US dollar and the stability of the global economy. Drawing on the 2008 financial crisis, the Federal Reserve lowered interest rates to zero and maintained for 7 years. www.xmserving.combined with quantitative easing (QE), although federal debt increased from $10 trillion to $20 trillion, the proportion of interest expenditure in GDP dropped from 1.7% to 1.3%. The US dollar index may experience a pain period with interest rate cuts and economic structural adjustments, or maintain a downward trend in the medium and long term. Note: The monthly line of the US dollar index fell below the upward channel under weak resistance.
The above content is all about "[XM Foreign Exchange Decision Analysis]: Economic Underwind under the American Political Polarization, Act Disputes and Future Chess Games of the US dollar index". It is carefully www.xmserving.compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!
Due to the author's limited ability and time constraints, some content in the article still needs to be discussed and studied in depth. Therefore, in the future, the author will conduct extended research and discussion on the following issues:
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