FX Update

US Tax bill hits the Senate, UK inflation numbers underperform, and ECB stimulus touted as highly successful.

 |  November 14, 2017

US inflation numbers come out on Wednesday, but all eyes are on President Trump’s tax bill.  Across the pond, the Pound missed inflation expectations while the Eurozone continues to grow under monetary stimulus.  In Canada we are waiting to see what inflation and home sales data looks like, while Asian currencies remain quiet around weaker output data from China.
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  • FX Rates
    November 14, 2017

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  • USD

    Treasury Secretary Steven Mnuchin warned that President Donald Trump's administration will not accept nor support any tax plan with a corporate tax rate of more than 20%. This is in regards to the negotiations between the House and the Senate for reconciliations to their passed bills. The House version of the tax bill comes to floor later this week.

    Eyes are on inflation data due out Wednesday but absent a large surprise, the results are not expected to cause much of a reaction in forex markets.


    The Pound has stabilized after an early sell-off (intraday low of 1.3075) on news that U.K. consumer-price inflation held steady in October, missing expectations for an acceleration (3% vs. 3.1% Est.). This data prompted BOE Governor Mark Carney to send a letter to Chancellor Phillip Hammond.

    Brexit Secretary David Davis announced in the House of Commons that he will introduce legislation for the parliament to vote on the final Brexit agreement with EU. 


    EUR punched through 1.17 in the morning session driven primarily by strong German preliminary GDP readings that it accelerated to 0.8% in Q3 (vs. 0.6% Est.). Eurozone economic sentiments beat estimates (30.9 vs. 29.3). Markets will be listening closely to Mario Draghi and Janet Yellen as Central Bankers attend an ECB event in Frankfurt today.

    ECB VP Vitor Constancio hailed the central bank's massive monetary stimulus as "highly successful" in driving recovery but maintained a cautious tone.

    The Canadian Dollar is slightly weaker against the Dollar for the week, trading around 1.2717. Existing home sales and inflation data comes out Wednesday and Friday, respectively. As WTI moves to its highest price since 2015, the links between CAD and WTI are being recoupled. Analysts are estimating if oil can get to $60/bbl, CAD should be able to get to 1.22 levels. December rate hikes have dropped to 20%.

    Asian currencies remain flat against the US Dollar today, with CNH appreciating the most, around a quarter of a percent. Policy makers in China should soon be addressing trade-offs between risk and growth as output data slowed in October. China is Australia’s number one trade partner.

    The Australian Dollar has been fighting back off lows against the USD on recent confidence data. There is also inflation data coming out Wednesday and the jobs report on Thursday. 

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Source: Bloomberg 2017

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About the Author

Ben Johnston is a foreign exchange advisor for Silicon Valley Bank’s global financial services group, based in Boston, MA. He specializes in developing niche-specific risk management and process optimization strategies for Silicon Valley Bank's Private Equity and Venture Capital clients, including exposure identification, risk management, policy development and tailored product strategy. He has over nine years of experience in the banking industry, including portfolio management roles at Sovereign Bank/Santander and Silicon Valley Bank.

He holds an undergraduate degree of Finance & International Economics from Bentley University.
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