Today’s Key Market Drivers – 3rd November 2017


Republicans release tax reform plans. US Dollar slides.

The US Dollar fell on Thursday after Republicans released their planned tax reform bill which would see company taxes reduced from 35% to 20%. So why the fall on the US Dollar if company taxes are going down to 20%? Economists and commentators are suggesting the tax reform bill won’t get the support it needs in Congress and even if it does some are saying a cut of 15% in the company tax rate won’t have a meaningful impact on the US economy. I disagree! Donald Trump campaigned heavily on a “Make American Great Again” theme and he promised “massive” tax cuts for American companies and infrastructure and stimulus programs that would boost the economy. A 15% tax cut will positively impact the US and no question the US economy is doing well, but it isn’t because Donald Trump is President. Most of the good fortune the US economy is now enjoying is due to the US Fed’s ultra-low interest rate policy and stimulus program over the past 8 years. If Trump can’t get his tax reform package through Congress then the US Dollar is going to lose momentum and the confidence investors have in buying US Dollar assets is going to slide in the short term.

The Bank of England committee voted 7-2 on Thursday to lift the official cash rate for the first time in 10 years bringing the Central Banks official interest rate from 0.25% to 0.5%. The Pound fell after the rate increase because the BOE said any future rate increases would be gradual. The market was expecting the rate increase and the Pound reacted negatively because the market had not priced in the expectations the BOE would say future rate increases would be gradual.

The Aussie Dollar has arrested its recent slide moving higher on Thursday after better than expected Trade Balance data. Today’s China manufacturing data due at 11.45am AEDST will be watched closely. All eyes in the US trading session today will be on the October US jobs figures that are set for release at 11.30pm AEDST. Canada’s official jobs numbers will also be released at the same time so expect to see increased volatility on the CAD and USD when you wake up Saturday morning.

 

About the Author: Andrew Barnett

Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts, and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular key-note speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).

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