The healthcare reform passed the final hurdle in the American House of Representatives. I’m not going to enter the heated debate about the reform – I’m just going to deal with the implications for forex trading.
There are different sides to this story:
The Upside – Strong Government
The historic healthcare overhaul is a great victory for US president Barack Obama. This was one of the pillars of his policy. Although he had a hard time passing it through the complicated legislative system, a hard time winning support for it when there were lots of protests and more than a few compromises on the way, it finally passed.
This strengthens the notion that the country and the economy are under control and that future economic policy can be realized, getting the US and the world out of the current crisis sooner than later. So one hand, this success is positive for the dollar.
The Downside – High Cost of the Bill
The other side is the bill itself – the healthcare reform bill means an additional expenditure of 940 billion dollars that will be spent on the course of a few years. The US government already has a huge deficit. It will have to print more money – devaluing the dollar, or borrowing more.
The US, together with the UK, already risk losing their AAA credit rating. More debt raises the risk for defaulting. Although such a scenario seems imaginary now, this bill could result in a credit downgrade, that will hurt the dollar.
Greenback Depends on Jobs
I think that the high cost of the healthcare reform bill will weigh on the dollar. Similar to Obama’s stimulus package of $787 billion, or Ben Bernanke’s bond buying scheme of one trillion dollars, this program will also have a negative impact on the dollar.
In the long run, a lot depends on employment. If the American economy gains more jobs, prices will rise as well and the Federal Reserve will move on the rates, sending the dollar higher. A continued jobless recovery will hurt the dollar.
What do you think? How will the healthcare reform impact forex trading?
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