US dollar 'treading water'

19 December, 2017

USD is “treading water” ahead of the expected enactment of President Trump’s tax bill. The initial euphoria of lower corporation tax, that many believed would see a repatriation of USD back into the US has begun to come into doubt. With the bill likely to be passed into law before the end of the year, many believe there will be no rush for Corporations to move funds back to the US as the repatriation of foreign profits is a permanent measure that companies will avail themselves of over a period of time. Additionally, whilst many US policymakers expect the economy to get a boost from the bill, analysts are suggesting that growth will be 2% by 2020, significantly lower than the Trump Administration’s predictions of growth around 3%. USD is little changed overnight.

Eurostat released Eurozone CPI on Monday that showed inflation inched higher in November but was still below the ECB target rate. CPI rose, in November, at an annualized rate of 1.5%, a slight increase on October’s 1.4%. Core inflation, the more closely watched by policymakers, remained unchanged at an annualized rate of 0.9%. EUR climbed steadily both before and after the release before retracing lower.

The Reserve Bank of Australia (RBA) released the minutes from its latest policy meeting earlier on Tuesday. The RBA has adopted a pessimistic outlook for consumer spending as household debt levels remain high and the economy experiences sluggish wage growth. The minutes stated; “However, growth in consumption was expected to have slowed in the September quarter and the outlook for household consumption continued to be a significant risk, given that household incomes were growing slowly and debt levels were high,” However, the RBA has a more optimistic outlook on the economy, as the global conditions have improved throughout 2017 and employment in Australia is growing at its fastest pace in more than 10 years. AUD is little changed in early Tuesday trading.


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