- US Senate approves a multi-trillion dollar budget which is “a first step towards massive tax cuts” according to Donald Trump
- USD flexes its muscles being the strongest currency in G10, the US10Y yield adds almost 4bps
- NZDUSD continues sliding following political tailspin and USD’s strength
The US Senate voted 51 to 49 in favour of a budget blueprint in a Thursday night session that could pave the way to a tax revamp which was a critical point during the Donald Trump’s presidential campaign last year. The US President called an approval of a muli-trillion dollar budget “the first step towards massive tax cuts” which could be a decisive move setting the stage for Republicans to rewrite the US tax code without a single Democratic vote. As a result, there is still a possibility of passing the resolution as soon as this year, many hurdles remain though. Having said that, the US budget sill has to also pass the House which probably won’t be as easy as it may seem. Notice that the Senate resolution envisages up to $1.5 trillion of tax cuts whereas the House version sought a deficit-neutral tax framework alongside spending cuts.
By and large, even as the first step towards “massive tax cuts” has been already made, there is still a long way to go. Nevertheless, this story is definitely supportive of the US dollar in the short term as it’s trading higher against its all major peers. Gains are also underpinned by the bond market where the US 10Y yield is adding nearly 4bps. To sum up, the news could be conducive to the global stock market as it’s paving the way to tax cuts which are bound to increase stocks’ valuation across the pond.
Meanwhile, the NZD is suffering the most due to USD’s strength fueling the above-mentioned story. Keep in mind that the Antipodean currency is still under pressure on the back of significant shifts at the political scene. The pair is now getting closer to an upward trend line which could halt the sell-off at least for a while. However, once this level is broken, a move towards 0.6850 could be in the offing. Source: xStation5