Good morning,

Back to square one on healthcare reform

Another day and another failed vote for the Trump administration with the so-called ‘skinny’ repeal of the Obamacare plan being voted down by the US Senate last night. 3 Republican Senators defied the administration and the matter of healthcare reform, which is such a massive first step for the administration’s reform agenda, is back to square one. This does not torpedo tax reform or the regulatory plans that the Trump administration want to enact but certainly makes them more difficult in the short term.

Similarly it seems that the Trump administration is no longer kicking around the idea of a border adjustment tax that would make imports from abroad more expensive. Senior Republicans said yesterday “while we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform.”

The Presidential Twitter account will be closely watched through the session. The dollar has come off a little since the vote failed but may accelerate as the US comes in later today.

CHF still selling off

Elsewhere the tea leaves are rather still with only a selloff in the Swiss franc grabbing much of the market attention. Moves in the European single currency have unnerved holders of the Swiss franc who are finally seeing EURCHF trade higher without the Swiss National Bank having to beat up on its own currency. Some euro volatility will likely come from individual inflation measures presented throughout the morning.

Sterling quiet for now…

There is very little sterling news at the moment. Parliament is obviously on a recess – although the last time Theresa May went on holiday she came back and announced a general election – and the Bank of England’s latest quarterly inflation report due next Thursday is not giving the pound much cause for concern yet. Despite all the dollar weakness that we have seen in the past few weeks, options markets are still charging a higher premium to protect against sterling falls than those in the dollar. We anticipate no hike in rates in August although we are not ruling out 2 votes for an increase in borrowing costs.

Have a great day and a better weekend

Jeremy Cook, Chief Economist