Following the release of the Senate and House tax plans yesterday, the US dollar weakened. The dollar continues to sell off this morning. While the currency was looking overbought in the short-term prior to the event, this is no longer the case today. Looking at the plans, the Senate version of the tax bill calls for corporate tax cuts to be enacted in 2019, keeps the existing 7 personal income tax brackets, while eliminating the SALT deduction entirely. The Senate version of the bill also maintains deductions including the $1m mortgage interest deduction and the medical expenses deduction. As we wrote yesterday, there was a significant risk of disappointment going into the event if the House and Senate tax plans contained significant differences. This appears to be the case and the US dollar is selling off as a result. While our medium-term outlook on the dollar remains bullish, this may be set to change if the currency continues weakening over the next few days.
USD/JPY is currently trading just below 113.50. EUR/USD rose yesterday and is flat this morning. The exchange rate is currently just below 1.1640. The pound is falling after rebounding yesterday, with GBP/USD currently above 1.3110.
This is a relatively light week for the US dollar looking at the economic calendar. JOLTS job openings beat slightly (6.093m vs. 6.091m expected), while consumer credit growth was also better than expected (20.8b vs. 18b). Continuing (1.9m vs. 1.89m expected) and initial jobless claims (239k vs 231k expected) both missed expectations. Last week the Fed did not raise interest rates, choosing instead to set the stage for a hike in December.