Analysts at Amplifying Global FX Capital, note that Trump’s respected economic team of Cohn and Mnuchin released the broad strokes of the tax plan that were leaked out and reported to the media in the last day or so and the plan is very ambitious and focused on making US companies internationally competitive, with the intention of bringing business investment and revenue to the USA.
Key Quotes
“The muted market reaction reflects doubts that comprehensive tax reform can get through Congress. However, there is scope for market optimism to build. The plan is being led by respected economic advisors who recognize the need to build consensus and demonstrate a willingness to negotiate. The Trump administration is taking a more proactive role in tax policy than it took with Healthcare. Further boosting the prospect for tax reform are reports that the Freedom Caucus holdouts on the Healthcare bill may now support an amended bill.”
“Passage of a bill to repeal and replace Obamacare would clear the way for negotiations on tax policy, and improve Trump’s record on delivering policy. Further supporting the USD are actions and orders that restrict international trade with the US. These have weakened the CAD and MXN in recent days, pose risks for China and Japan, and, more generally, for countries reliant on global trade; including many emerging market and commodity currencies. Finally, Trump has taken funding the Mexican border wall out of the government funding bill negotiations, lessening the risk of a negative fallout to near-term economic confidence in the USA.”
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