• Tax trade bolsters USD
  • Taking a swing at 2017
  • Canada’s PM visits Washington
  • Weak yen fuels GDP growth in Japan

The dollar is extending gains from Friday on the promise of a tax plan out of the Trump administration. The outline for his proposed taxes is due around February 16-23rd and will be chased up by the State of the Union address on February 28th. US investors have been distracted by protectionist policies out of Washington, but resurgent hopes of reflationary policies such as tax cuts and spending will likely fuel a higher USD.

It’s a major week ahead for the USD as we get a run of the first major data prints of 2017. Retail sales and inflation figures will draw attention on Wednesday, and amongst the various Fed members that will be speaking will be highlighted by Fed chair Janet Yellen’s testimony before Congress. Investors are not expecting the Fed to hike interest rates in March, but if Yellen is perceived to be hawkish the market could rapidly reprice these expectations.

President Trump is holding his first face-to-face meeting with Canadian PM Justin Trudeau in Washington today. What’s on the table? Likely trade and the Keystone XL pipeline. Trump has been a vocal critic of NAFTA, the trade agreement between the US, Canada, and Mexico. Trudeau has already expressed willingness to enter into a bilateral agreement with the US and leave Mexico in the dust.

Japan’s growth slowed in the fourth quarter but still closed the year in expansionary territory as a weaker yen fueled exports. Overall the outlook for Japan looks more stable after this weekend’s meeting between President Trump and Japanese PM Shinzo Abe. Both came out with vague but optimistic comments after Abe’s visit to the states.

EURUSD: Euro weaker against the USD as President Trump promises to deliver on tax cuts.

GBPUSD: Sterling fairly static after overnight spikes as Brexit chatter cools.

AUDUSD: Aussie Dollar weakens on broad USD strength.

USDCAD: No clear direction for CAD/USD ahead of the Trump/Trudeau meeting in Washington.

USDJPY: Yen weaker, may try to test 114.