Tomorrow, Republicans in the House of Representatives are expected to unveil the first draft of Trump’s tax reforms. Beyond the impact from tax cuts, the bill is expected to foreshadow the trajectory of Trump’s broader economic agenda. Thus, the proposed changes and deficit projections are important for a few reasons. Beyond immediate impact of tax cuts, markets will be pricing in Trump’s age…

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As the Trump/Corker feud rages in the background, a crucial vote is set to take place later today in Washington. The House of Representatives will formally vote on the Senate’s budget resolution (passed last week), that will allow Republicans to pass Trump’s tax reforms using a tool called reconciliation. Reconciliation allows lawmakers to adjust aspects of t…

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As the Trump/Corker feud rages in the background, a crucial vote is set to take place later today in Washington. The House of Representatives will formally vote on the Senate’s budget resolution (passed last week), that will allow Republicans to pass Trump’s tax reforms using a tool called reconciliation. Reconciliation allows lawmakers to adjust aspects of t…

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Recent news reports suggests that Trump ‘gushed’ about Stanford University professor John Taylor following his White House interview. After the story was reported in Bloomberg, the US dollar index strengthened on expectations for higher interest rates in the future. The ‘Taylor Rule’, authored by Taylor himself, is a rules-based equation for setting central bank interest rates.

While central ban…

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Crude oil prices have been benefiting from talk of supply cuts. This was particularly the case earlier this week, when Saudi Arabia announced it would cut its oil exports in November by 560,000 barrels per day. Earlier in the month, the King of Saudi Arabia traveled to Russia, marking the first ever official trip by a Saudi monarch to Russia. The two countries have seldom cooperated in the past, …

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On Thursday, Trump signed an executive order allowing small businesses and groups to band together and buy health insurance through so-called association health plans. It also lifts limits on short-term health plans, which are currently limited to 90 days. Trump will also allow insurance companies to sell the new plans across state lines, creating a more competitive marketplace for health insuran…

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Sometimes one has to wonder if financial markets react to news events, or if the market dictates the news. Last week we voiced our concerns that the dollar was starting to look overbought in the short-term, making it vulnerable to a pullback. With rising optimism for Trump’s tax reforms, positive economic data and a December rate hike priced in, there were few signs of an imminent pullback. Yet t…

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Given the relatively quiet start to this week, trading will remain light until important data is announced later this week. For the US dollar, markets will be closely watching Wednesday’s FOMC minutes and Friday’s Consumer Price Index figures. Expectations for a rate hike in December are running very high, with CME’s FedWatch Tool indicating an 86.7% probability of the Fed hiking rates by 25 basis points on December 13.

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In our last take on the subject, we suggested that in a world that is fundamentally oversupplied, marginal demand was the main driver of crude oil prices. Given China’s voracious appetite for oil this year, prices have been supported by a 12%+ increase in year-over-year physical demand from China. The bear case for oil assumes falling future demand from China in rate-of-change terms, given econom…

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As markets await further details from the White House regarding its tax reform proposal, criticism of the first draft continue to add up. Recently, even Republicans are expressing their disappointment with the plans. US Senator Rand Paul recently tweeted: “This is a GOP tax plan? Possibly 30 percent of middle class gets a tax hike? I hope the final details are better than this.” Paul was referrin…

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Trump’s ability to get laws passed through Congress has been his clear weakness. Despite Republican control of both the House and the Senate, the president has been unable to build enough support to deliver his election promises. Yet, skepticism towards his administration has entered extremes, and even a small win in an area like healthcare or tax reform can change the trajectory of expectations.

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Despite big promises and even higher expectations, Trump’s ability to deliver has been a question mark for markets for most of 2017. Following the failure to reform healthcare in the first half of this year, markets went bearish on Trump and his broader agenda of tax cuts and fiscal spending. Inflation expectations, initially driven by hopes for fiscal spending and tax cuts, fell sharply alongsid…

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