US: Economic landscape guided by politics – BBH

In the US, there are two important political tracks and the first is in Washington, where a healthcare vote returns, as the Republican Party negotiates with itself and still appears to have fallen short of a solution, explains the analysis team at BBH.  

Key Quotes

“More broad details of tax reform are expected, but the harder questions, like offsets, are unlikely to be presented.  It may be enough to fan the embers of hope but still fall short of providing much light.  We suspect it is more a 2018 story than 2017.”

“The second is the special Senator election in Alabama to fill Attorney General Session's vacated seat.  The contest will give some sense of the battle for the Republican Party, which could be as important as the 2018 midterm elections.  Strange, who was appointed earlier this year, is running as the incumbent.  He is running against Moore, who is supported by the Freedom Caucus.   President Trump came out to support Strange, but he also expressed misgivings.  A victory for Moore may demonstrate the vulnerability of the centrist Republicans associated with the party's elite and intensify the challenge to incumbents in the primaries early next year.”

“The Fed's monetary decision is still being absorbed by investors.  The market has moved to increase the likelihood of a December rate hike, and the two-year interest rate differential is the widest in six months, but the dollar has not gained much traction.  The euro briefly traded above $1.20 for the seventh time before the weekend.  Important support is pegged in the $1.1800-$1.1825 area.  A convincing break could open the door to a two-cent move initially. However, on balance, the technical indicators suggest another run to the highs (or toward the 50% retracement target of the decline since mid-2014 that is found near $1.2165).”