The US Senate is rushing to vote and approve a massive tax cut program. The rise of the threshold for the maximum tax rate to around $1 million will benefit the richest Americans. The cut of the corporate tax will help the stock market, but will unlikely trigger extra growth, at least when factoring the extra $1.5 trillion of debt that the move will add in the next decade.
There are many more changes in the tax code and quite a few Republicans have reservations and changes will be made until the very last minute.
Nevertheless, these politicians seem quite calm and are eager to sort their differences out as soon as possible. The procedural votes are proceeding swiftly and an approval is likely by Friday. The dynamic of the deliberations is very different from those that preceded the failed attempts to change health care.
Greenback gaining ground
Apart from stocks, also the US dollar is enjoying this optimism on the hill. The greenback is extending its gains against all the important currencies, with the exception of the pound, which is riding on its own optimism regarding a Brexit breakthrough.
If companies that are stashing profits abroad will bring the money back home, there is a good reason to go long USD. However, nobody expects huge moves, so the dollar bullishness isn’t likely to go wild.
It is important to note that the greenback also enjoys an upgraded GDP report and some optimism from Yellen.
Here is how it looks on the USD/JPY daily chart:
