House Republicans Vote In Favour Of Tax Reform
Pi De Jonge | Nov 17, 2017 14:34
Yesterday, the US House voted in favour of the Republican tax reform bill via a 227-205 vote. The vote marks a significant step towards finalising the highly-anticipated tax overhaul of the Trump administration. Now, the Senate has to vote for its own version of the tax bill, something anticipated taking place after the Thanksgiving holiday (November 23rd). However, the upcoming Senate vote may be much trickier than the House one. Republicans only hold a 2-seat majority in the Senate, while some Republican Senators have already voiced concerns and hesitation about the tax bill in its current form, mainly due to the projected increase in the nation’s deficit.
Even though US equity indices rebounded after the House vote yesterday, the dollar actually moved a little lower throughout the Asian session Friday. The move has been attributed to a WSJ report that special investigator Robert Mueller issued a subpoena last month to more than a dozen top officials in the Trump campaign. According to the report, the subpoena ordered the campaign officials to turn over requested documents and emails that reference a set of Russia-related keywords. Although this shouldn’t be particularly shocking, given that everyone knows the Mueller investigation is still ongoing, it may have served as a reminder to the market that political uncertainty in the US has not diminished yet.
EUR/USD traded somewhat lower on Thursday but hit support at 1.1760 (S1) and during the Asian morning Thursday it rebounded. The rate continues to trade within the range between 1.1660 (S3) and 1.1830 (R1) and thus, we stick to our guns that the outlook is flat for now. A clear close above 1.1830 (R1) is needed to make us confident that the slide started on the 8th of September was just a corrective phase and that the picture is back to positive. On the downside, we need to see a clear close below 1.1660 (S3) before we start examining the case for larger bearish extensions.
h3 EUR/USDSupport: 1.1760 (S1), 1.1700 (S2), 1.1660 (S3)
Resistance: 1.1830 (R1), 1.1880 (R2), 1.1940 (R3)
Today’s highlights
During the European morning, the economic calendar is very light, with the only noteworthy indicator we get being eurozone’s current account balance for September.
In Canada, inflation data for October will be in focus. The headline rate is expected to have pulled back, while no forecast is available for the core print. Further softness in inflation would probably be discouraging news for BoC policymakers, especially considering that the core rate surprisingly declined last month. At the time of writing, the implied probability for a BoC rate hike by January is roughly 50%. A potential pullback in the headline CPI rate could drive that percentage lower and thereby, weigh on CAD. On the other hand, should inflation surprise to the upside, for instance by the core rate finally moving higher, then market expectations for a January rate hike could heighten, and the Loonie could rebound.
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USD/CAD moved slightly lower yesterday, but the slide was stopped near the short-term uptrend line taken from the low of the 12th of September. As long as the rate continues to trade above that line, the short-term picture remains positive in our view. Today we get Canada’s CPI data for October and expectations are for a slowdown. Something like that may be the catalyst for a rebound from near the aforementioned uptrend line and another test near the 1.2790 (R1) resistance. A decisive break above that barrier may pave the way for our next resistance of 1.2860 (R2). On the other hand, if inflation surprises to the upside, then the pair could break the uptrend line and the 1.2710 (S1) support, a break that could initially aim for the 1.2660 (S2) zone.
h3 USD/CADSupport: 1.2710 (S1), 1.2660 (S2), 1.2600 (S3)
Resistance: 1.2790 (R1), 1.2860 (R2), 1.2915 (R3)
In the US, building permits and housing starts are due out, both for October.
We have three speakers on the agenda: ECB President Mario Draghi, ECB Governing Council member Jens Weidmann, and UK Brexit minister David Davis.
Sources: Econ Alerts and FXGiants
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