US tax reform close to the finishing line

Hopes that the US tax reform bill is clearing the final stages of Congress have helped boost stock markets around the world. The FTSE took the lead from Asia overnight and has started the penultimate trading week of the year, on the front foot.  #

After finishing the previous week 1.3% higher, this morning, the FTSE has charged meaningfully through through 7500, whilst the Dax has also added over 1% in early trading.  

The House and the Senate combined US tax reform bill was published late on Friday evening, with Trump and US Treasury Secretary both expressing their delight over the weekend. The combined bill is expected to be voted on possibly as soon as this week. After some concerns in the previous week that the Republicans were not going to be able to reach the majority of votes needed, investor nerves have calmed after the two wavering Senators have been swayed back onside. However, this is not quite a done deal. There are still two Senators with health issues and it is still unclear whether they will be able to make the vote, the give Trump his first legislative win since taking the White House. 

Whilst the US futures are charging higher, the pockets of concerns are showing through in the US dollar, which is trading weaker across the board in the early part of Monday. 

 Eurozone inflation under the spotlight 

Eyes are now turning squarely to Eurozone inflation data. The European Central Bank (ECB) disappointed investors last week with its inflation projections. The ECB raised its economic growth forecast considerably over the coming 3 years, but the inflation forecast still remained below the 2% target at 1.7%. So even strong economic growth across 4 years (including 2017) does not look as if it will solve the stubbornly low inflation issue of the Eurozone. 

Today we are expecting inflation for the bloc to hit 1.5% in November, up from 1.4% in October. Meanwhile core inflation, which strips out more volatile prices such as energy and food, is expected to remain steady at 0.9%. 

EUR/USD has pushed higher in early trade, helped by the softer dollar. A solid inflation reading could see the pair charge through $1.18. However, following the reading we expect the pair to be driven by further developments in the US tax reform bill, which could prevent EUR/USD head meaningfully towards $1.19.  

Bitcoin starts trading on the CME 

Bitcoin is trading over 10% higher this morning following the start of Bitcoin futures trading on the CME. This is the second exchange to offer bitcoin futures and has cemented the currency’s legitimacy. When expectations of Bitcoin reaching 20,000 by the end of the year were first put out there, the forecasts were met with a degree of scepticism. But as we have come to realise with Bitcoin, almost anything is possible price wise.