Frenzy Friday for EUR, USD, JPY, GBP and Aussie, following a churning Thursday as GOP’s tax plan was closely eyed by investors.
The financial markets were sensitive yesterday to the US policymakers’ decision regarding the new tax bill. The plan put forth by the Republicans was to implement a 20% cut on corporate tax after a 1-year delay. This decision almost blew up the screens on Thursday, ditching the Dow 130 points lower and hit hard the USD. In respnse, USDJPY traders relentlessly pushed the pair near the 113 tipping point.
Analysts warn about an obvious risk-off tone in currency markets, but trying to infer whether investors hate the tax plan or only aim for profits is the key determinant. The spotlight is now on equity index futures, after USDJPY came in around 113.305 and is now hovering around 113.533.
The dollar will most likely struggle over the weekend as US policymakers will tighten the collar around the greenback’s neck near term.
What’s in it for the JPY? In the long term, the clearly dovish BOJ position will continue to weigh heavily on the yen.
European traders closely eye the US tax plan as yield differential drops in dollar-negative manner.
EURUSD rose to its 4-day highs at 1.16555 on Thursday as the greenback was massively offered, sensitive to the US tax bill one-year postponement.
Today, EURUSD trades around 1.16385 – 86 as the USD remains offered.
With Brexit talks holding the headlines, the GBP is still under pressure. The UK manufacturing production release (expected to break the contraction wall and ease to 0.3% on monthly basis in September vs. a 0.4% expansion in August) is likely to impact GBPUSD trading, calling GBP bulls to a standstill and pushing the pair back beyond 1.3113 levels. This leaves room for a test around 1.3177-1.3180 levels. The pair might break support (1.3100 level) should the economic data be disappointing.
RBA’s revised monetary policy statement to use central forecasts instead of forecasting ‘ranges’ shook things up for the Aussie as underlying inflation is not expected to reach 2 pct before the beginning of 2019.
RBA analysts say that further rise in AUDUSD would potentially decelerate economic growth.
AUDUSD trades today around 0.7610 – 0.7615.