Senate Approval of Tax Overhaul Boosts US Dollar

Daily Analysis - 04/12/2017

Greenback Rebounds from Flynn Testimony Lows

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The US Senate approved the much-touted tax-reform legislation over the weekend, sending the greenback rallying to the highest point in weeks against the Japanese Yen in early Monday trade. The Dollar tumbled on Friday after former US National Security Adviser Michael Flynn claimed he was guilty of lying to federal investigators about his conversations with Russia’s ambassador.

Tax Bill Passage Draws Market Attention Away from Flynn Saga


The Senate’s approval on Saturday of the biggest change in US tax code since the 1980s has received widespread investor support amid expectations that the tax cuts for businesses would invigorate the economy. Talks should likely begin this week between the Senate and the House to reconcile their respective versions of the legislation. USDJPY is climbing in Monday Asian trade to currently hover around the 113.000-mark.

The pair was knocked down a peg on Friday following the Flynn testimony news, sliding as low as 111.400. Documents made public as part of Flynn’s plea agreement revealed that the former NSA’s discussions with then Russian ambassador, Sergey Kislyak, were part of a coordinated effort by Donald Trump’s presidential campaign to create foreign policy stance even before his elevation to the Oval Office.

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Loonie Spikes After Canadian GDP Report


The Canadian Dollar shot higher against the greenback on Friday after third quarter economic growth and November job gains topped market expectations. A report published by Statistics Canada indicated the pace of gross domestic product expansion decelerated to an annual pace of 1.70% in the third quarter. While that figure was much below the roaring 4.30% rate posted in the second quarter, it came in above the 1.60% growth predicted by economists.

A separate report showed the country added 79,500 jobs last month, while the jobless rate slipped to just above a 10-year low of 5.90%. November jobs growth easily topped the 10,000 increase forecast by economists following the addition of 35,300 positions in October. USDCAD soared by as much as 1.10% to finish Friday at 1.2683 before mounting a weak rebound above 1.2700 in Monday morning trade.

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British Factories Intend to Hike Investments


Factories in the United Kingdom plan to increase their investments at the fastest rate in four years, reinforcing signs that the manufacturing sector could help support an otherwise listless economy. The quarterly survey from trade body EEF found that manufacturers’ investment intentions surged to their highest level since the second quarter of 2014 amidst anticipation of a sharp rise in selling prices for both exports and domestic goods. EEF’s findings have been backed up recent manufacturing data, with Markit’s purchasing managers’ index for the sector rising to 58.2 in November from an upwardly revised October reading of 56.6, topping market expectations of 56.5. FTSE 100 futures are off the highs of early Monday session to last trade around 7365. UK Prime Minister Theresa May is set to meet key European Union officials on Monday, attempting to close a deal on Brexit divorce terms.

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Aussie Dollar Buoyed by Solid Data


The Australian Dollar is holding firm above a two-week trough against the US Dollar on Monday, supported by a batch of positive macroeconomic economic data. Estimates from the Australian Bureau of Statistics showed that businesses rebuilt inventories during the third quarter, adding 0.20% in seasonally adjusted volume terms. Wages bills increased by 1.10% during the three-month period, driven by better than forecast jobs growth.

However, company profits fell by -0.20% amid a retreat in coal and iron ore prices following a rally earlier in the year. On an annualized basis, profits grew 20.00% according to the statistical agency. The recent strength in key business indicators comes ahead of third quarter GDP figures slated for release on Wednesday. The current consensus is for the economy to have expanded by a solid 0.70% during the third quarter. AUDUSD was last seen trending back below 0.7600 as the US dollar’s momentum drags the pair lower.

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