Tickmill
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Markets try to make light of US fiscal reform

FX:EURUSD   Euro / U.S. Dollar
Greenback

US Dollar             reinforced position on Monday against major peers as Republicans in Senate released their version of the tax reform, which now will need to be discussed with the House of Representatives.The vote in the Senate on Saturday had a positive outcome for the Trump fiscal initiative, which provides sharp tax cuts for firms from 35% to 20%, as well as tax incentives for individuals. Reaching agreement on the bill in the Upper House where Republicans retain a small majority sharply increased chances of passing the bill.

However, as I said earlier, the Senate is likely to propose a "soft version" of the reform that is already priced in the market, so stock markets and greenback response is likely to be low-key. In addition, the tax reduction project for companies has a deferred nature, so that the fiscal momentum turns out to be a bit stretched in time, which also keeps investors from building hopes for further expansion of the economy. December rate increase is almost 100% likely to be priced in the market while little is known about next year hikes except from vague Fed comments on the normalization cycle. As expected, the regulator will move the rate 3 to 4 times in next year.

Dollar index             maintains a balance near the level of 93.00. The data from ISM was a bit disappointing on Friday as it turned out to be worse than the forecasts, but now investors' focus remains on potential surprises in the implementation of the tax cuts.

Rig count back to growth

Oil             prices started the week with a decline, as the report of Baker Hughes             showed last week that the drilling activity of shale companies gained further momentum. Rig count increased from 923 to 929, stoking fears that US oil             companies will use OPEC's trade-offs to increase market share.

British Pound

The British pound also fixes losses, but remains tuned to growth amid notable success of the British government in the deal with European Union. The main interest is the meeting between Prime Minister Teresa May and European Commission President Jean-Claude Juncker on the further settlement of differences in the draft "divorce" of Britain with the bloc.

Bitcoin            

Bitcoin             again updated its highs on the weekend, reaching a record high after last week CFTC approved bitcoin             trading on the largest stock exchanges of CME Group derivatives and CBOE             Global Markets. The price jumped Sunday to a record $ 11,800, but later dipped to $ 10,300 before winning back part of it gains.

Arthur Idiatulin


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This analysis is provided as general market commentary and does not constitute investment advice.
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