Through the Senate
Late on Friday night the Senate passed its tax plan 51-49. Having read some of it over the weekend, it is not hard to see why the Democratic Party are furious and the dollar is stronger. Now both the House and Senate bills have to be merged and voted on again by both chambers of Congress before going to President Trump for his signature.
The campaigns for next year’s Midterm elections will begin soon and passage of this tax reform bill may be what is needed for the Trump administration to get more of its agenda voted on before the electorate has the opportunity to overturn the majorities Trump holds in both Houses.
Dollar is slightly higher this morning but risks remain around the data calendar and the ongoing FBI investigations over the role of the Russian state in the 2016 election. Friday’s ISM manufacturing PMI for November came in at 58.2 which is down from October’s reading of 58.7 and September’s reading of 60.8. The overall trends within the numbers were decent however and show that the manufacturing sector is continuing to recover from the impact of recent poor weather.
No such thing as a free lunch
Theresa May and EU President Donald Tusk will sit down for lunch this afternoon in a bid to further hammer out the details of latest Brexit terms. Agreement here on matters such as the divorce bill, Ireland and the rights of EU citizens will open the door to an agreement at the EU Commission meeting next Thursday to begin talking about trade.
Sterling has driven higher this morning on the belief that a deal on the Irish border may be announced in the coming few hours but there are many threads to this particular string. Any deal on the Northern Irish border is set to hurt one of the participants, either the DUP that is propping up Theresa May’s government or the wider EU via weakness in the Irish economy and fears over the continuation of the Good Friday peace agreement.
For now sterling is reacting on the belief that any agreement is good news but as we have seen with Brexit many times before, an agreement simply opens up a new litany of questions that need to be answered.
Have a great day.
Jeremy Cook, Chief Economist