American FX Outlook: US tax plan sets the tone

What you need to know

• The US dollar is broadly firmer against its major counterparts as the new week begins in a risk aversion mode.
• Sterling fell sharply after reports showed PMI Theresa May losing the ground in the Conservative party, clouding her ability to deliver on Brexit negotiations this year.
• Global stock markets extend decline after the US Senate said the US tax cut plan will be valid since 2019.

Monday’s market moving events

• The major macro event of the week is a Wednesday’s US CPI report seen confirming the path of December rate hike from Federal Reserve.
• Canada is off on Monday for Remembrance Day.
• The US federal budget report is due to show a deficit of $50 billion in October.
• The Bank of Japan Governor Haruhiko Kuroda is scheduled to speak in Zurich at 17:45 GMT.

Major market movers

• Sterling is a loser on the day falling as much as 100 pips, or 1.0% against the US Dollar with the UK political development derailing its Friday’s bullishness.
• With no much on the agenda for the US session on Monday, news about the US tax-cutting plan will drive the market with the key debate within the Republican Party.

Earlier in Asia/Europe

• Reports from British media said the UK Prime Minister Theresa May is likely to face a no-confidence vote within Conservative party after 40 conservative members of parliament signed a letter asking for her resignation. 
• Philadelphia Fed president Patrick Harker said he doesn't expect dramatic changes in Fed policy when asked about the appointment of Powell as next Fed chair. In terms of policy outlook Harker lightly penciled in December rate hike with three rate hikes in 2018 as he remained cautious about low-inflation conundrum, expecting rebound. “I have penciled in one rate hike this year and three next year, but want to make sure we make progress toward inflation goal,” Harker said.
• German wholesales prices decelerated to 3.0% y/y in October 2017 compared to +3.4% in September.
• ECB vice-president Vitor Constancio said the ECB is not yet fulfilling its mandate and that is why monetary policy will have to continue to be very accommodative.