Tax news is good news for the US dollar with the US Senate adopting a Budget resolution for next year that will open the door to Donald Trump’s plans for tax cuts. This is the very easy, first step in getting a tax plan agreed, voted upon and adopted. Republican members will have to be kept sweet on deficit measures given the widespread disbelief that the growth in US GDP will make up for the lack of governmental income.
Donald Trump’s closest advisers are steering him toward choosing either Stanford economist John Taylor or Federal Reserve Board Governor Jerome Powell to be the next Fed chief, according to several people familiar with the process, both would be seen to be more supportive of the USD than Janet Yellen has been.
European Union throws rare bone to UK PM May
The President of the European Union Donald Tusk issued a rare lifeline to Theresa May this morning by stating that EU leaders have agreed to begin “internal preparations” for trade talks. The comments were quickly underlined with a reminder that no trade talks can take place until the so-called divorce payment is agreed upon, but it still appears to represent material progress on both sides of the English Channel. Sterling’s recovered slightly on the back of the comments, being further aided by expectations that the UK government will up the size of their divorce payment offer to something nearer € 60 billion.
With the two-day EU leaders summit now at a conclusion, Theresa May will return to London to try to mesh together a proposal that won’t be laughed out of the House of Commons. A tough task for the prime minister who many still believe is on thin ice.
Woeful retail sales send CAD to one-month low
August retail sales contracted by 0.3% in Canada, with food leading the headline figure lower. Of the 11 retail subsectors tracked by the data, 8 of them registered declines despite economists’ views of a 0.5% rise. Ahead of next week’s Bank of Canada rate decision, today’s numbers have led the market to believe the Bank will pause for longer before raising rates once more. The CAD’s been knocked sharply, with USD/CAD now testing the 1.26 level for the first time since early October (which marked the highest USD/CAD since August).
The calendar for the rest of the session is somewhat quieter for data, but the Fed chair Janet Yellen is due to speak this evening just after markets close. Investors will be closely watching for any clues on how the race for the top job at the Federal Reserve is going.
Have a great day and a better weekend.