Daily Market Update

U.S. Dollar Steady as Tax Reform Looms Near

November 28, 2017

The U.S. Dollar is trading in mostly favorable ranges with the prospect of passing tax reform a dollar-positive development.

USD

Later today, the Senate will start reviewing and debating major tax reform legislation that could even go into a vote by the end of the week. Senator Rand Paul of Kentucky is said to have been convinced to offer his support, thus jumping over a hurdle for a need majority on the floor. The buck was also riding the good wave from the best New Home Sales pace in a decade.

Later today we will have Consumer Confidence data as well as Jerome Powell’s Fed Chair confirmation hearing. The latter event could provide a headline or two if his answers to questions from senators hint at any future policy guidance. He is believed to be a continuation from Janet Yellen, which eases the minds of market participants.

At the time of writing, a surprise 0.4% contraction in Wholesale Inventories started to negatively impact the dollar slightly. The figure was expected to expand just as much, but fell instead.

 

EUR

The Euro remains around its strongest levels in two months, following news of a better outlook for Chancellor Angela Merkel in forming enough of a coalition to govern. The talks between parties are set to take weeks, but there is confidence in the air.

With little in terms of data as we enter the last month of the year, any risk of political instability may weigh on Euro if negotiations collapse. For now, the currency is likely to stay afloat because economically there are no concerns short-term.

 

GBP

The Pound had rebounded after successful stress tests on banks, which all passed for the first time since the exercise has been done. Accounting for an ugly Brexit scenario and a recession, all institutions showed ability to handle and manage. Nevertheless, Mark Caney, Bank of England head, warns that the longer Brexit uncertainties remain, since not much is clear in current talks, the more vulnerable the financial system.

The divorce proceedings are still heated in regards to the border between Ireland and Northern Ireland. The idea of a physical border could spark tensions in a region with a history of violence and cultural struggles, yet with understanding and peace in recent years during EU partnership. Arrangements between the UK and the Republic of Ireland now face obstacles because of a political scandal in the republic that is forcing the deputy Prime Minster to resign.

 

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