Lack of progress on US Tax reform sets cautious tone

On Thursday, the US Dollar edged lower against major currencies with rising concern on a lack of progress on tax reform in the US. The Senate tax plan seeks to delay until 2019 the introduction of a headline corporate tax cut from 35% to 20% while limiting the generosity of other tax reductions. Debate on the Senate plan will begin among lawmakers next week as the House plan moves towards a floor vote. Meanwhile President Donald Trump said that China is taking advantage of American workers and American companies with unfair trade practices, but he blamed his predecessors in the White House rather than China for allowing the massive US trade deficit to grow.

Meanwhile, Sterling fell for a third consecutive day against its major peers as growing political turbulence surrounding Prime Minister Theresa May’s government sapped institutional investors’ demand for British assets. A string of scandals leading to two resignations from the cabinet in the space of just one week has raised doubts over the Conservative government’s ability to secure a strong deal in negotiations over Britain leaving the European Union.

Last Friday, the Australian Dollar slipped as the Reserve Bank of Australia (RBA) reiterated in its statement on Monetary Policy that growth is picking up and inflation will remain subdued. The RBA sliced its forecasts for core inflation, which is seen lurking under its 2-3% target band for another two years, a strong signal that rates won’t rise for a long time.