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President Trump tax cut concerns halts US Dollar rally

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9 November 2017

Matthew Ryan

Senior Market Analyst at Ebury. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.

The US Dollar edged lower against the Euro this morning, while slipping to a one-week low versus the Japanese Yen on Wednesday, as investors grew concerned over potential delays to Donald Trump’s proposed tax reforms.

he greenback has experienced a renewed lease on life in the past few weeks as President Trump appeared to finally be making headwinds over his plans to dramatically cut corporation tax in the US. A report released from the Washington Post this week has, however, put somewhat of a cap on the currency’s recent rally, reporting that Senate Republican leaders were considering a one-year delay to the implementation of the cuts in order to comply with Senate rules.

Contrary to the opinions of the Trump Administration, rating agency Fitch also stated on Tuesday that they were sceptical of the economic benefit to such tax cuts. Fitch suggested that they could have no more than a temporary boost to economic output.

Initial jobless claims this afternoon are expected to remain around their multi-decade low level. In the absence of any significant surprises there, expectations for Trump’s tax reforms should continue to be the main driver behind the US Dollar this week.

Government controversies weigh on Sterling ahead of Brexit talks

With absolutely no economic data releases whatsoever in both the UK and Eurozone yesterday, traders awaited with bated breath news out of the latest round of Brexit negotiations, set to begin today.

A number of controversies among the Conservative Party have done little to improve sentiment towards Prime Minister Theresa May and her ability to get the best possible deal with the EU. Aid Minister Priti Patel’s future came into doubt after she had a number of undisclosed meetings with senior Israeli politicians. PM May’s cabinet was already rocked following the resignation of Defence Secretary Michael Fallon amid a sexual harassment scandal last week.

The lack of any economic or political news stories in the Eurozone meant that the common currency traded within a very narrow range. The currency ended trading effectively unchanged versus the US Dollar.

Activity in the Eurozone should pick up pace today with a number of central bank speakers having the potential to ramp up volatility. European Central Bank member’s Cœuré, Constancio and Lautenschläger will all be making appearances this afternoon.