U.S. Session Recap: Dollar Charges Higher on Mnuchin’s Tax Comments

Dollar bulls charged back into the markets today after U.S. Treasury Secretary Steven Mnuchin hinted that a “major tax reform” will be announced “very soon.”

  • U.S. Philly Fed manufacturing index dips from 32.8 to 22.0 in April
  • U.S. initial jobless claims shoots up from 234K to 244K
  • Euro Zone consumer confidence improves from -5 to -4
  • U.S. CB leading index clocks in at 0.4% vs. 0.2% expected, 0.5% previous
  • Mark Carney calls for “dynamic” approach to bank regulations
  • Mnuchin: Tax reform will be done whether or not health care gets done
  • Mnuchin: Trump’s “major tax reform” to be announced “very soon”

Major Events:

Weak U.S. data – Uncle Sam saw another round of disappointing economic reports during the U.S. session.

Manufacturing activity in Philadelphia rose slower-than-expected in April, clocking in at 22 from 32.8 in March and 43.3 in February. New orders may have been a factor, as new orders growth slowed down from 38.6 to 27.4 in April. Unlike other indices, a reading above 0.0 is enough to indicate growth.

Meanwhile, new applications for U.S. jobless benefits rose slightly more than expected last week. Initial jobless claims ticked higher by 10,000 to 244,000 following three consecutive weeks of decline.

Last but not the least is the CB leading index, which grew by 0.4% when analysts had expected a 0.2% uptick but also printed below last month’s downwardly revised 0.5% reading.

Mnuchin’s tax comments – One reason why the dollar bulls have shrugged off weak economic data was Treasury Secretary Steven Mnuchin hinting that we might see a tax reform plan soon.

In a conference in Washington, Mnuchin did an about-face from his earlier remarks and now believes that the administration is close to presenting a “major tax reform” and that the White House is expected to share it “very soon.” Mnuchin didn’t give a schedule, but he hinted that passing an overhaul of the tax code will not “take till the end of the year.”

The Treasury Secretary added a sweet cherry on top of his sweet comments by sharing that “Whether health care gets done or doesn’t get done, we’re going to get tax reform done.

If you recall, market players got jittery earlier this year when a failure to repeal the Obamacare threatened Trump’s tax plans, which is one of Trump’s major campaign promises and also one of the reasons why markets had rallied since Trump’s inauguration.

Mnuchin’s comments, together with strong earnings reports from U.S. companies, boosted equities across the board.

  • The DJIA gained 0.85% to 20,605.43,
  • S&P 500 shot up by 0.77% to 2,351.75, and
  • NASDAQ rose by 1.02% to 5,923.01.

Major Market Movers:

USD – The Greenback brought sexy back on the back with the help of Mnuchin’s tax-related comments.

USD/JPY jumped by 23 pips (+0.21%) to 109.34, EUR/USD fell 27 pips (-0.25%) to 1.0719 after hitting a high of 1.0777, and USD/CHF charged 25 pips (+0.25%) higher to .9986.

Watch Out For:

  • 12:30 am GMT: Japan’s flash manufacturing PMI (52.5 expected, 52.4 previous)
  • 4:30 am GMT: Japan’s tertiary industry activity (0.3% expected, 0.0% previous)

See also:

London Session Recap
Asian Session Recap

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