Tax almost certainly has to be taxing

President Trump is set to announce the finer points of the Republican tax overhaul plan at some point today. The main impetus of the plan will be to reduce corporation tax down closer to the 15% that Trump campaigned upon – it currently sits at 35% – and most reports suggest that Congress will eventually agree on a figure between 20 to 25%.

As we have seen in the 8 months of the Trump administration so far there is a distinct vacuum between a speech and the action; the Mexican border wall, the Obamacare repeal act and other regulatory battles have all fallen by the wayside.

The key with a Trump speech is what else he says; speeches on the economy can veer into a broadside at Hillary Clinton, China, Mexico, hurricanes or North Korea. While we may be listening for detail on the tax plan, it is what we hear on other matters that may have the market impact.

Dollar buoyant following Fed

Fed Chair Yellen gave a speech yesterday on ‘Inflation, Uncertainty, and Monetary Policy’ that they need to continue gradual rate hikes despite weak inflation. It “would be imprudent to keep monetary policy on hold until inflation is back to two percent”. Needless to say we see this speech and other comments as consistent with an interest rate increase in the United States in December. The dollar rallied in response and EUR/USD now sits close to 2.5% below its recent high printed on September 20th.

Central banks on the agenda

Following Yellen’s comments yesterday, Fed’s Bullard, Rosengren and Brainard speak today, but Bank of Canada governor Poloz could steal the limelight as he speaks for the first time since their recent rate rise. An October move remains on the cards and any comments intimating as such could light a fire under the CAD. Finally, the Reserve Bank of New Zealand rate decision takes place overnight where they’re expected to keep rates on hold at 1.75%.

Have a great day.