US dollar loses ground on US tax reform delay report

The US dollar has lost ground overnight against a number of currencies following a report in the Washing Post that the widely touted tax reforms could be delayed by up to one year.

US dollar loses ground on US tax reform delay report

The US dollar was weaker Wednesday, following a report in the Washing Post Tuesday, suggesting the eagerly anticipated US tax reform bill, could be delayed by up to a year.

Evidence that US president Trump’s popularity is waning, also weighed.

By 1040 BST, cable was trading at $1.312, the currency pair moved as low as $1.3040 last week. Against the US dollar, the euro was at $1.1597 after trading at $1.155 overnight. And, against the Yen, the US dollar was at Y113.70, from Y114.28 overnight.

US tax reform delay

An apparent difference of opinion over what is required and how to achieve it through tax reform, has been reported as likely to cause a delay to Trump’s proposed changes.

After the initial support for wholesale tax reforms from the markets, investors and businesses, this latest news has hit sentiment. And, that uncertainty has seen bullish investors become a little more cautious.

According to the Washington Post, who cites people familiar with the negotiations, Senate-based Republicans aren’t in complete agreement with those in the House. This means negotiations aren’t currently expected to be concluded anytime soon, as they thrash out their differences.

The reported sticking points include:

  • Exactly when to implement the main thrust of the tax reform – the $845 billion corporate tax cut. The Senate is reportedly keen on delaying that element until 2019.      

  • How to ensure how more of the middle classes receive the benefits intended for them, while limiting their availability to the wealthiest.

Trump’s popularity waning

In the meantime, a Gallup opinion poll recording President Trump’s approval rating, doesn’t make for great reading, either.

The latest calculation puts Trump’s approval rating at 38%. While it’s just below the 39% average for the whole of his Presidential term, to-date, it compares with his high point of 46% reached twice in January 2017. It’s also not too far off his low point of 33% in October this year.

If Trump can’t encourage more unity among his party and get those tax reforms through quickly, support for the dollar could remain less pronounced. Particularly as economic performances and central bank plans are looking up, elsewhere.

Right now though, investors will likely sit tight around current levels, until more detail on the tax reform story are confirmed or denied.

As of 10:45 GMT, Wednesday, 08 November, GBP/USD share price is 1.3117.

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