Following news that the U.S. Senate would delay corporate tax cuts until 2019, effectively derailing President Trump’s tax reform plan, the U.S. dollar has been dropping. The corporate tax cuts would drop the rate from 35% to 20%, which Trump hints at being vital toward stimulation of the American economy. After the news broke, the U.S. dollar index, which measures its strength against a trade-weighted basket of six major currencies, fell by 0.43%. It remains to be seen what the Senate actually wants to do with Trump’s tax plan. Adjustments could be made, or it could be delayed all together.
Disappointing U.S. Data
Although the tax reform delay played a huge part in the decline of the dollar, it was not the only determining factor. A report showed massive weaknesses in the labor market, despite previous projections. In fact, the U.S. Department of Labor reported that initial jobless claims increased by 10,000 to 239,000. Original projections had the increase closer to 2,000, which shows that Trump’s claim of a strong job market is not trending in the right direction.
EUR/USD Hits Six Week High
Amidst the tax reform drama in the United States, the EUR/USD actually hit a 6-day high this week. The U.S. dollar index feel to a fresh low at 94.33, which is heading toward a November low. At the time this article was written, the EUR/USD is at 1.1646, which is its best performance in weeks. That is crucial for the Euro, because it is back above the 1.1620 mark that allows the currency to receive immediate support. As long as it stays above that, it will continue to be supported. At the current rate, there is a chance that the Euro could approach November highs, which are at 1.1685/90. Meanwhile, the GBP/USD also rose about 0.24%, while the USD/JPY and USD/CHF both fell by more than 0.20%. On the other hand, the Australian and New Zealand dollars remained steady throughout.