Forex today: stocks and DXY plummet on tax delay sentiment

• US Senator Bill Cassidy confirmed that the Senate Republicans had planned to propose delaying a cut in the corporate tax.
• DXY tanks to close -0.4%.

In the absence of any scheduled data events in NY, forex today was again focussed on the developments around the US tax legislation in the House and Senate, making for a flight to the safe havens such as the Swissy, yen, and gold. Antipodeans underperformed. 

The dollar got a bashing across the board when US Senator Bill Cassidy, a Republican from Louisiana confirmed that the Senate Republicans had planned to propose delaying a cut in the corporate tax rate from 35 percent to 20 percent until 2019; This sent US stocks to session lows and the DXY down -0.31% that eventually extended to a session low of 94.41 from a high of 94.95 to settle at 94.51, -0.38%.

US 10yr treasury yields initially climbed to 2.35%, then dropped to  2.31% on the Bill Cassidy noise. 2yr yields initially rose to a new high of 1.66% since Oct 2008 before a drop to 1.63% on the same noise. The Fed fund futures yields continued to price the chance of a December rate hike at 97%.

The euro rose from 1.1600 to 1.1655 on dollar weakness but stalling on EUR/JPY safe haven flows as the stock market plummeted. (the cross dropped from 132.22 to 131.76 before recovery bounce back to 132 the figure as stocks recovered some ground). Safe-havens yen and Swiss franc outperformed, with the USD/JPY dropping from 114.00 to 113.09 and the Swissy 0.9995 to 0.9921. GBP/USD played catch up after feeling pressures in European trade on the political fall-out in the UK, and in doing so, the cross stabilised and consolidated the 0.5% bid. GBP/USD closed at 1.3145, up from 1.3085 lows to 1.3165 highs.

As for the antipodeans, AUD/USD felt the drop in US stocks falling from 0.7694 to 0.7650 but partly recovering to 0.7680 by the close. The Kiwi dropped from 0.6980 to 0.6934 as the day's underperformer and despite the air of hawkishness from the RBNZ when 2019 inflation expectations picked up in their forecasts. The XAU/USD pair extended its daily gains in the NA session to its highest level since October 20 at $1288.81 adding $5, or 0.4%.

Key events in Asia:

Analysts at Westpac offered their outlook for today's key events in Asia as follows: REINZ housing data is due sometime during the next few days. Australia: The RBA Statement on Monetary Policy will provide the RBA’s updated forecasts. The RBA forecasts will now be a point estimate to the nearest quarter point rather than a range. Westpac expects unchanged 2018 and 2019 forecasts (mid-point of range), but 2017 growth to be revised up to 2.75% and inflation down to 1.75%.

Key notes:

• Wall Street erases portion of early losses, still closes lower as investors digest tax plan
• Senate tax plan meets $1.5 trillion federal deficit ceiling for tax legislation - Reuters
• US Dollar looks to close day at weekly lows as tax proposal's details unveil
• House seeks to increase proposed tax rates on repatriated foreign profits to 14% from 12%
• US Senate Aide: Tax bill would repeal federal deductions for state and local income
• US: Sales of merchant wholesalers were $480.5 billion, up 1.3% from August