Fundamental analytics

Equity markets continue to rally, strong statistics supported the British currency

US futures indicate a strong opening of US markets on Wednesday after the Senate approved a $ 1.5 trillion radical tax bill, bringing President Donald Trump closer to his first legislative victory.

The bill was approved by a vote of 51-48, but the Senate was forced to send it back to the House for a second vote due to a procedural inaccuracy at the last minute. However, this step will not change the result.

The proposed changes include a reduction in the corporate tax rate to 21 percent from 35 percent, starting January 1, and are expected to become the main corporate profit driver in 2018.

The long-awaited bill led to a record rally in stocks, as many analysts believe that cutting corporate tax can provide an additional profit increase from about 7 to 10 percent next year.

It is expected that the Senate will submit its final approval today and send the bill to Trump for the signing of the law.

On FOREX, the British currency continues to trade volatile while maintaining in a narrow price range. Now the moderate weakness of the dollar is playing into favor of the British currency, which we see after the FOMC meeting last week. This is the main factor that allows the British currency to be held at current levels and even add a little weight.

The problem with Brexit remains the main deterrent to the growth of the pound and the most important impact of these problems will have a long-term character. In recent days, this topic has gradually faded into the background, as news began to appear extremely rarely, but nevertheless it remains the main factor affecting the value of the pound. Yesterday, the media reported that the EU still does not want to make concessions to the UK and intends to prohibit the financial organizations of the United Kingdom from working in the EU countries. The pound sank after the appearance of this information, but later it was able to play these positions on the decline of the dollar index during the American session.

Today, the pound is still trading quite confidently. Support for the British currency was provided by the IMF report, published today. According to forecasts, the economic growth of the United Kingdom in 2018 will slow by 1.5%. This is explained by a decrease in the companies spending and private consumers associated with uncertainty about Brexit. At the same time, the economic prospects of Great Britain will in the future directly depend on the results of negotiations on Brexit. For a while the pound is growing on the publication of this report, as investors expected a weaker forecast for GDP growth from the IMF for 2018.