Hallowe’en witch hunt

Washington DC and the markets have had little to distract them from yesterday’s news concerning Paul Manafort and other Trump campaign staffers being indicted as part of the Russian collusion investigation. It’s unsurprising that the administration, beyond brief Twitter outbursts, is hesitant to comment on the proceedings directly – the White House legal team is likely keeping a close eye on any external communications – and, in short, there is little new news that needs to be priced into the dollar. As was always the case, this is going to be a slow, gradual news story, but one that could have significant ramifications.

On Trump’s tax plans, it appears they’re being slowly, but surely, watered down. News that corporate tax cuts will be rolled out slowly over a series of years suggests that Trump’s initial plan of cutting tax rates quickly and deeply is meeting internal resistance. The dollar’s stature throughout Q4 this year will depend on how these conversations go.

Catalan werewolf in Brussels

After alarming news coverage of the disintegration of political discourse in Catalonia over the past few days and weeks, the crisis appeared to cool yesterday as the Spanish government reclaimed Catalonia’s autonomy and assumed control of all local authorities with little resistance. Puigdemont, the former Catalan President, has fled the region for Belgium under threat of arrest and both secessionist and pro-Madrid parties will now prepare for elections due ahead of the 21st December.

There has been a somewhat critical shift in public opinion over Catalan independence in the past 10 days or so. According to polling, just 34% of Catalans now support secession from Madrid and projections see the pro-independence parties falling short of a parliamentary majority. Spanish bonds and equity markets rallied throughout the day and this appears to have lent some support to the euro, which has pulled back from last week’s lows.

The silence of the impact reports

UK Brexit minister David Davis, as part of his planning for a ‘no deal’ outcome with Brussels, is to brief the cabinet on the likely impacts of a hard Brexit for 58 separate industries and sectors. The issue for those operating in those sectors is that all briefings and impact reports will be hidden from public view and not released in any form. It’s said that the contingency planning and policymaking would be hindered by carrying out the debate in public view and could undermine their negotiating position with Brussels.

Understandably, the opposition has been very critical of the government discussing the outlook for close to 90% of the economy behind closed doors, but we anticipate the details won’t remain unseen for long as the negotiations with Brussels continue to stagnate and linger.

The day ahead

With the bulk of US data now out of the way until tomorrow, the beleagured Kiwi dollar faces the New Zealand labor market report due overnight.

Have a great day.