Dollar Pares Gain as Trump Tax Presentation Offers Little Detail

Updated on
  • Mnuchin confirms proposed corporate tax cut, targets 3% GDP
  • Dollar-yen hits 3-week high before profit-taking weighs

President Trump Calls for 'Biggest Tax Cut'

The dollar pared gains as Treasury Secretary Steven Mnuchin and Trump economic adviser Gary Cohn unveiled tax reform proposals that offered few new details and failed to answer questions about how they would be paid for.

The plan, which White House officials called the “biggest tax cut” in history, proposes lowering the federal income-tax rate for businesses, condensing existing individual tax brackets, and eliminating the alternative minimum tax. The euro strengthened above 1.0900 versus the dollar during the briefing, paring earlier losses by more than half, while the yen rebounded to below 111.30 per dollar. Meanwhile, U.S. Treasury yields edged to session lows.

  • USD earlier rose to a fresh high for the session, driven largely by gains vs the CAD and MXN, after a Politico report said the U.S. might consider withdrawing from Nafta. Trump is seriously considering signing documents that signal an intent to withdraw from Nafta within 6 months, the Washington Post reports
  • Bloomberg dollar spot index up ~0.4% on the day, down from earlier gains of more than 0.6%; the dollar gained vs most of its G-10 peers
  • Focus is shifting to policy decisions Thursday from the BOJ and ECB; the ECB is expected to leave rates and policies on hold, and traders will closely parse remarks from Draghi for any shift in stance on future policy given recently improved economic data. Tuesday, the euro gained amid talk that the ECB president may be more upbeat on the economic outlook in his remarks. Despite the improved data, Draghi has repeatedly said that there is little evidence that the inflation picture has stabilized. The risks to the outlook remain tilted to the downside, Draghi told an IMF committee Friday.
  • USD/JPY is trading near 111.40 after rising as high as 111.78, its highest since March 31. Bids and stop-loss sell orders are clustered around 111.00, while offers are layered near 112.00, said traders familiar with the transactions who asked not to be identified because they are not authorized to speak publicly. The yen has fallen this week with some signs that Japanese investors have stepped up investment flows to Europe amid perceptions that political risk has subsided after Sunday’s vote in France
  • EUR/USD is trading near 1.0897 after reaching a U.S. session high of 1.0912 following the tax proposal briefing. Overnight, the shared currency rose to 1.0951 before falling back as offers capped the move for a second day.