Yesterday, US Senate and the House of Representatives continued to work on the tax reform bill. Markets expect that by the end of the year a compromise will be found and the document will be signed by US President Donald Trump. The reduction of taxes will stimulate economic growth and create new jobs in the US economy. However, a counterbalance to tax cuts is a possible increase in the budget deficit.
As for inflation, many experts believe that tax cuts will not become an obstacle to inflation growth to the target 2%, since low unemployment, sooner or later, will lead to an increase in wages, which, in turn, stimulates inflationary growth.
As it became known yesterday, the House of Representatives adopted the tax bill. Now it is Senate turn, which will vote on this version of the bill, most likely, after Thanksgiving day.
Yesterday statistics from the US was mixed. Initial claims for unemployment benefits increased to 249 thousand (235 thousand), while import prices rose by only 0.2% (0.4%). Industrial production in October increased by 0.9%, which is more than expectations. In general, yesterday's statistics did not provide any support for US dollar.
This week, the European currency moved to a strengthening on the day of German GDP data and on strong statistics, the pair gained to the highs that were traded almost a month ago last time. Yesterday, the European currency tried to gain a foothold on new levels, after a rollback from the local maximum of 1.1860. Nevertheless, today we can say that the euro's losses are insignificant, Eur / Usd pair was able to gain a foothold at the levels of the first support 1.1756. Yesterday's weakness of the euro has been violated by the technical nature. However, a negative signal for the further growth of the euro is the candlestick pattern of the falling star, a clearly bearish signal, signaling that the Eur / Usd pullback may be more significant. Today, the main pair of FOREX market is trading the level of $1.1796, showing a good strengthening in Asian trading. In the short term, this area is likely to be a test area. If the market can gain higher, then the next resistance level is the recent highs of 1.1860-1.1880.
To other pairs of the currency market. The dollar is trading within the limits of yesterday's low against the yen, just below the round level JPY112.50. USD/JPY is trying to gain a foothold in this level of support. The British pound is clearly stronger than the US currency today. Somewhat stronger than expected, the report on retail sales helped to reduce the negative impact of GB political events. October retail sales increased by 0.1%. The indicator was higher than the forecast by Bloomberg, and the decline in September also fell by 0.1%. Nevertheless, the annual rate became negative for the first time in four years.
Yesterday Brent oil market declined, but the situation as a whole remains uncertain and at the same time quite interesting. The main factor of pressure on oil price is still the growth of production and oil reserves in the United States. Possible extension of the OPEC agreement somewhat restrains pressure on oil market.
The next OPEC meeting will be held on November 30 in Vienna. Market hope that OPEC countries as well as non-members of the cartel will agree on the extension of the current agreement to reduce production, which expires in March next year. Today, oil prices demonstrate mixed dynamics, Brent oil market is trading at $61.88.