From the House to the Senate
Yesterday afternoon, the House approved their version of tax reform legislation, bringing Trump’s ‘Cut Cut Cut Act’ one step closer to reality. Unfortunately for the White House, the next step is likely to be much, much more difficult. While the House were voting on the legislation, the Senate Finance Committee gave the thumbs up to their draft – and it’s very different. Delaying tax cuts, maintaining mortgage interest deductions and repealing tax penalties associated with Obamacare – all issues that will have to be settled if the Republicans are going to get anywhere near a solid vote before Thanksgiving.
We saw a similar scenario with the healthcare reform plans earlier this year – the proposals passed the House comfortably before becoming unstuck in the Senate and, eventually, consigned to the policy dustbin. Markets may be disappointed if the tax reform plans suffer the same fate.
Mueller dents the dollar
The greenback found little cheer from the modest progress of tax reform yesterday as political risk rose on the back of Mueller’s subpoena being sent to the White House. The Wall Street Journal has reported that over a dozen campaign officials from Trump’s election team have been ordered to release documents and information related potential collusion between the Presidential campaign and the Russian government. EUR/USD’s benefited from the news and the currency pair now sits on gains of over 1% on the week.
Any further leaks or claims on either the Mueller or government side will continue to hold influence over the dollar for the foreseeable future.
Brexit laughed out of the room by German business
Last night, Brexit secretary David Davis stated that “We will be a third country partner like no other,” in a speech to the German business community at the Süddeutsche Zeitung Economic Summit in Berlin. Cynics would suggest that the word ‘world’ is missing from that statement and while Davis may have implored the German business community to not put “politics above prosperity” his pleas seem to have fallen on deaf ears.
Movements in parliament seem to suggest that a transitional deal is becoming more likely with reports that the PM will drop demands for the exit date from the EU to be enshrined in law.
An EU leaders summit begins today and another round of Brexit headlines will dominate the weekend papers and likely the opening of sterling on Monday.
Have a great day.