US Futures Higher as Tax Reform Hurdle is Passed

Trump Tax Plans Add Support to Already Convincing Stock Market Rally

US equity markets are on course to open higher on the final trading day of the week, having recovered strongly following a tough start on Thursday to end the day in the green.

The buy the dip mentality is alive and well, with traders clearly not willing for markets to drop even a little before pushing them higher once again. The passing of the budget resolution through the Senate late on Thursday is likely helping lift sentiment further today, with final approval in the House being a big step towards Donald Trump’s long awaited tax reform being enacted.

As Steve Mnuchin made clear this week, a portion of the rally in equity markets since Trump’s election victory in November was driven by the expectation that tax reform will happen and provide a significant boost to the economy and companies. A failure to deliver on this would be a huge blow to Trump and could be damaging for markets as well, although this now looks increasingly less likely.

U.S Budget Resolution Provides Dollar Temporary Relief

IBEX Lags Behind as Madrid Moves to Impose Direct Rule Over Catalonia

In Europe, the Spanish IBEX is once again lagging behind its peers and is the only major index to trade in the red. Prime Minister Mariano Rajoy is believed to be planning to convene a special cabinet meeting this weekend to begin the procedure of suspending Catalonia’s autonomy, with the Senate possibly voting on imposing direct rule next week. The unrest that will likely follow could further unsettle investors in Spanish assets.

GBP Jumps on Optimistic May Comments After Meeting With EU-27

The pound has been given a minor boost this morning by optimistic comments from Prime Minister Theresa May following her meeting with the EU-27. May’s acknowledgement that the UK will honour its financial commitments to the EU while claiming her counterparts will consider a vision for a future partnership is a small step forward in negotiations that has seemingly failed to be achieved in discussions between David Davis and Michel Barnier.

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As we head into the end of the week, there isn’t too much on the agenda. Canadian retail sales and inflation numbers stand out as the key data releases while we’ll also get existing home sales figures from the US. The Fed’s Loretta Mester is due to speak on regulation but her comments will be followed in case the conversation moves to monetary policy as it sometimes can.

DAX Rebounds on Stronger German Inflation

The yen is slipping a little as Japan prepares to head to the polls this weekend, with Prime Minister Shinzo Abe looking to solidify his position in the face of weak opposition, something that looks likely but also has a UK feel to it. And we all remember how that worked out.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.