The U.S. dollar shrugged off upbeat medium-tier reports as traders were zoned in on Quarles’ speech and tax plan updates.
Unfortunately for the Greenback, market participants are starting to doubt that some of the items in the GOP proposal could be positive for the economy.
Meanwhile, the Kiwi tumbled later in the day after the GDT auction yielded another decline in dairy prices.
- IBD/TIPP Economic Optimism index up from 50.3 to 53.6
- JOLTS job openings up 6.09M vs. projected 5.98M figure
- U.S. consumer credit rose from $13.1B to $20.8B vs. $18.4B forecast
- BOC Governor Poloz: Will be cautious about future rate moves
- Poloz: Central bank is monitoring wage growth and inflation
- Poloz: Slack remained in labor market, too early to call an uptrend
Doubts about U.S. tax plan
The lack of top-tier economic data and the winding down of the earnings season in Wall Street allowed market junkies to put more focus on how the tax reform proposal has been doing so far.
According to U.S. House Ways and Means Committee Chairman Kevin Brady, the plan will be put to a vote in Congress by next week.
However, credit rating agency Fitch warned that this plan may simply lead to a temporary boost instead of having a long-term impact. After all, the cuts would be revenue-negative and would likely lead to a larger government deficit.
Apart from that, word through the forex grapevine is that Senate Republican leaders are looking to impose a one-year delay before implementing a major corporate tax cut to comply with Senate rules.
Testimony by BOC head Poloz
It looks like BOC head honcho Poloz wasn’t so impressed by the upbeat Canadian jobs report for October as he noted in his speech that there’s still slack left in the labor market.
Instead, he reiterated that policymakers are being extra cautious about mulling future rate changes since they are keeping close tabs on wages and inflation. He mentioned:
On a less downbeat note, he also pointed out that the central bank has a good understanding of inflation dynamics and that they would be comfortable with the actual figure missing the target, whether to the upside or downside, as long as it was temporary.
“A lot of pieces need to fall into place before we can be certain that the economy has made it all the way home.”
Poloz hardly gave any hints on what the BOC might do in December, and his openness to the idea of seeing stronger upside inflationary pressures led market watchers to consider his remarks less dovish than expected.
Major Market Mover(s):
U.S. bond yields and the dollar tanked upon hearing rumors of a potential one-year delay in seeing tax cuts as this would postpone a highly-anticipated economic boost.
EUR/USD climbed from a low of 1.1554 to a high of 1.1607, USD/JPY slumped back below 114.00, USD/CHF dipped to a low of .9978, and AUD/USD found support at .7630 to recover to .7660.
The Kiwi was already having a rough day then it extended its losses upon seeing a 3.5% slump in dairy prices during the latest auction.
NZD/USD is down to the .6900 mark, NZD/JPY fell to a low of 78.49, EUR/NZD popped up from 1.6688 to 1.6790, and GBP/NZD is closing in on 1.9100.
Watch Out For:
- Tentative: Chinese trade balance (275B CNY expected, 193B CNY previous)
- 6:00 am GMT: Japanese leading indicators (drop from 107.2% to 106.7% expected)