Good morning,

Trump on taxes

With the first round, and some would argue the second round as well, of the French presidential election in the bag and the vote now centrist candidate Emmanuel Macron’s to lose, market focus has left France and re-centred on the Trump White House.

Wednesday should see the Trump Administration publish its tax plan that will likely include cuts to personal income taxes as well as a cut to taxes paid by businesses to around 15%. If anything has been the driver of the strength of US equity markets and the US dollar since Donald Trump won the election it has been his expected impact on the US tax code.

Dollar looks weak even as Trump takes on others

Movements by Trump elsewhere have also ruffled the feathers of the Canadian dollar and the Mexican peso as he increased lumber tariffs on Canadian exports into the US.

For our money, and given the likelihood of further Congressional wrangling over the border wall which could push the US government into a partial shutdown this weekend, we think that the tax plans may disappoint. Similarly Friday’s GDP announcement is likely to show growth slowing on the quarter albeit due to seasonal factors mainly and we are looking for additional USD weakness into the long weekend.

Data calendars quiet until Thursday

Ahead of the tax plan announcement, things have been rather quiet with most pairs consolidating in ranges. The data calendar this week hardly helps matter by being a bit of a trash can of 3rd tier data until the ECB meeting on Thursday and the GDP announcements from the UK and the US on Friday.

With little else to report we’ll leave things there for the session.

Have a great day

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