Summary:

  • US Senate chose to postpone voting on the tax bill till Friday
  • SP500 (US500 on xStation5) and Dow Jones (US30) set their new highs in anticipation of the tax bill voting
  • Japanese inflation did not surprise but other readings beat the estimates

The long awaited voting on the tax bill scheduled initially to take place on Thursday was postponed at least to Friday as the bill faced some snags concerning an amendment sought by fiscal hawks to address a tremendous expansion of the federal budget deficit forecast to stem from the measure. Even as voting was put off until Friday it’s still uncertain if a decisive vote on the bill occurs today which could be a significant drag on the US dollar and the US stock market as well. Notice that the US equity markets were discounting a successful vote on the bill on Thursday as they gained substantially. The SP500 (US500) moved up 0.8%, the NASDAQ (US100) added 0.7% while the Dow Jones (US30) rose as much as 1.4%. It’s worth underlining that those gains were enhanced following a speech of Republican Senate leader Mitch McConnell who had seen the passage of the tax bill late Thursday.

link do file download linkEven as the US500 established its new high on Thursday it was not able to retain its gains until the end of the day. As a result, the price has moved from a resistance being additionally underpinned by an upper limit of a channel. Once the tax bill isn’t passed today, it could encourage more investors to pull out of their money which in turn could see the index slipping toward a lower boundary of a channel. Source: xStation5

Despite the splendid session on Wall Street Asian investors have been much more cautious as the major indices have not moved too much so far. The highest gain was on the Japanese NIKKEI (JAP225) which increased 0.4% following an avalanche of the macroeconomic data from the domestic economy for October. Overall inflation was broadly in line with the forecasts remaining a long way off the BoJ’s target though. On the flip side, household spending came in at 0% yoy beating the estimate -0.3% yoy whereas a job-to-applicant ratio rose from 1.52 to 1.55 illustrating that the Japan’s labor market is getting tighter boding well for the inflation outlook at least conventional wisdom suggests so. On top of this, let’s add that Chinese Caixin PMI slid from 51 to 50.8 in October while Australian manufacturing PMI shot up from 51.1 to as high as 57.3 nonetheless the Australian dollar did not respond at all.

link do file download linkMeanwhile, the USDJPY has been little changed thus far today. Nevertheless notice that the pair bounced off a crucial support and is constantly underpinned by the US bond market. Assuming that the tax bill will be passed till the end of the week, it could push the US dollar higher closer to 114.3 against the yen. Source: xStation5