Trump to try and drive tax reform pre-Christmas
With Thanksgiving done, the focus for the USD falls back on to the Republican tax plans. President Trump is due to sit down with Senators tomorrow and a vote on the Senate’s tax plans is scheduled for Thursday. The Senate has been the graveyard for Trump’s reform agenda so far and there are enough Republican Senators who have expressed displeasure in the plans to knock the bill over once again.
Any plan from the Senate would have to be melded with the plan from the House and voted on again so we will have to do all of this again before Trump gets to sign anything. Progress is a dollar positive news event but progress is unlikely today.
Another week of Brexit
Bloomberg is reporting this morning that European Council President Donald Tusk has given Prime Minister May until December 4th – a week today – to come up with a new offer on the Brexit divorce bill if she wants to break the deadlock in negotiations.
Similarly, the question of the Irish border must also be progressed. Secretary of State for International Trade Liam Fox speaking yesterday said that it could not be solved until the final plan was revealed. Issues over the future of the Irish government and a possible new election before Christmas in the Irish Republic are not going to help matters at all.
Forming a coalition
Merkel’s CDU/CSU party yesterday agreed to pursue a ‘grand coalition’ of the two largest parties in German politics, aiming to join with the SPD in governing Germany as they had for the past 4 years. Such a deal would eliminate the need for another election and swiftly remove a chunk of political risk from the single currency.
EURUSD is up above 1.19 this morning and while this is not significant in itself, previous runs in and around the 1.20 level have been met with some form of leak from the European Central Bank that has had the effect of weakening the single currency. These have typically focused on disagreement within the Executive Council or delays to plans over the tapering of the Bank’s QE program. We will be watching the wires to see if ‘sources’ suggest something that the market will take as a negative for the EUR.
With little to incite optimism for oil, we expect CAD to remain under pressure in the near term.
Have a great day.
Jeremy Cook, Chief Economist