With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The table below shows the difference in US Dollars you would have achieved when buying £200,000.00 during the high and low points of the past 30 days.
|Currency Pair||% Change||Difference on £200,000|
Over the weekend US Senators voted in favour by 51 votes to 49 and passed Donald Trump's tax cuts which I believe short term will be a positive for US dollar exchange rates. Since Donald Trump's appointment the President has struggled to pass any key legislation and has had many set backs, one of note being Obamacare. Under the new tax cuts, the corporate rate will be lowered from 35% to 20%. Reports are mixed to whether this will help the US economy long term. A group within the Senate have warned that the cut will see the budget deficit rise dramatically over the next decade. However, Trump's argument is that economic growth will increase and therefore help to pay off the deficit.
Although Donald Trump has managed to pass his new tax legislation, it’s not all smiles for the President. Friday afternoon Ex-national security advisor Michael Flynn pleaded guilty to meeting with Russian ambassadors just weeks before Trumps appointment as President. What makes it worse is that he made false statements and lied to the FBI. This puts severe pressure on the President as reports months ago suggested that Donald Trump told FBI agent James Comey to stop investigating his national security advisor.
The President appeared to lose his cool late Sunday evening and did what he does best, and therefore took to his twitter account to defend himself. Depending on the outcome of this, if Trump's party are proven guilty and the Russians did interfere in the US election I expect this would lead to major US dollar weakness. However for the time being you are innocent until proving guilty therefore I expect the market reaction to be minimal.
Throughout the week there are many economic data releases to look out for starting with trade figures and Markit services data Tuesday, employment change Wednesday and initial jobless claims Thursday (for more information on these releases contact the trading floor), but the key releases to look out for are on Friday.
The US government shutdown limit is this Friday. Therefore if there is any problems this week with Trumps tax cut plans (even thought they have been approved), the US government would be shut down on Friday. Unemployment numbers are released Friday afternoon at 1:30pm, the consensus is for a slight rise to 4.2% and I’m not surprised as the amount of jobs created (non farm payroll numbers) 2 months ago was –33k. At the same time Non-Farm payroll numbers are to be released and the consensus is for a fall from last months figure to 185k. I’m thinking it could be a poor finish to the week for the US dollar.
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