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Trump and his tax breaks

Trump and his tax breaks

GBP
The Pound gained on its recent losses against the Euro and Dollar yesterday, however, commentary from strategists still suggests “sufficient progress” in Brexit negotiations is unlikely to prove a silver bullet for Sterling weakness in the short term.

The UK CBI industrial orders index remained at 17 for December equalling the strongest outcome for close to 30-year highs. Export orders also remained strong and well above historical averages, although there was a slight slowdown from November levels while there was sustained upward pressure on prices. Sterling was 0.69% higher at 1.3394 against the Dollar while the GBPEUR rate was marked 0.11% higher at 1.1348.

The economic calendar is off to a slow start this week, as investors parse through a light release schedule ahead of the holidays. Today, data releases from the Eurozone and US will make headlines.

USD

Yesterday was a quiet day for the Dollar, and this will continue today in terms of economic data. The headlines are grabbed by the Republican tax bill which is on the verge of being passed with a vote today. The Dollar did surrender gains made on Friday, however, as Cable rose to pass the 1.3400 barrier before closing just shy of that mark, whilst closing at 1.1808 against the Euro.

The Dollar fell yesterday due to investors remaining cautious ahead of the Senate vote with long Dollar positions being unwound. A possible late addition to the tax bill, providing a tax break to real estate owners, is an example of how there are still question marks over this tax bill. This, however, should not stop the Republicans from success today with the vote and Trump is expected to sign it into law later this week.

EUR

In the Eurozone, the final inflation figures confirmed that headline inflation rose by 1.5% on a year-over-year basis in November. The core inflation rate was seen rising 0.9% in November. There was no change to the data following the flash inflation estimates.

German business conditions are the first data released today, with the Ifo Group releasing separate barometers for business climate, current assessment, and expectations. The readings for December are expected to print largely in line with last month.

Later in the morning, the European Commission’s statistical agency will report on construction output and labour cost. The labour cost index is forecast to rise 2% in the third quarter. Construction output is forecast to grow 1.1% annually in October.

Data To Watch:

08:00 EUR IFO – Business Climate (Dec)
08:00 EUR IFO – Current Assessment (Dec)
08:00 EUR IFO – Expectations (Dec)
10:00 EUR Labour cost (Q3)
13:30 USD Housing Starts (MoM) (Nov)
13:30 USD Building Permits (MoM) (Nov)
13:30 USD Building Permits Change (Nov)
13:30 USD Housing Starts Change (Nov)
n/a USD FOMC Member Kashkari Speech

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