Forex – Dollar Continues to Climb on U.S. Tax Reform Talk

© Reuters. Dollar pushes higher vs. rivals with eyes on tax reform plans – The dollar continued to climb against other major currencies on Friday, on fresh hopes for a major U.S. tax reform and amid ongoing speculation over the next head of the Federal Reserve. The greenback was boosted after the U.S. Senate late Thursday approved a budget blueprint for the 2018 fiscal year that will pave the way for Republicans to pursue tax-cut plans without Democratic support. The Republican-controlled Senate voted for the budget measure by 51 to 49, which would add up to $1.5 trillion to the federal deficit over the next ten years in order to pay for proposed tax cuts. Meanwhile, speculation over who will replace Janet Yellen as head of the Fed persisted. Reports that U.S. President Donald Trump was leaning toward Fed Governor Jerome Powell, who is perceived as a less hawkish candidate, had temporarily weighed on the dollar. Trump concluded interviews on Thursday with the five candidates, including Janet Yellen, he is considering to chair the Fed. He could announce a decision as early as next week. EUR/USD dropped 0.43% to 1.1801, while GBP/USD fell 0.23% to trade at 1.3129. The euro came under pressure as the Spanish government was set to suspend Catalonia’s autonomy and impose direct rule after the region’s president refused to abandon the push for independence on Thursday. The announcement came after Carles Puigdemont threatened a unilateral declaration of independence if the Spanish government did not agree to talks on the issue. In the UK, data earlier showed that public sector net borrowing increased by £5.33 billion last month, beating market expectations. The yen and the Swiss franc remained lower, with USD/JPY up 0.72% at 113.55 and with USD/CHF climbing 0.72% to 0.9834. Market participants were looking ahead to Japan’s general election, scheduled on Sunday. Recent polls suggest that Japanese Prime Minister Shinzo Abe’s ruling coalition is on track to match the two-thirds “super majority” it held in parliament’s lower house before the snap election was called. The Australian and New Zealand dollars were lower with AUD/USD down 0.48% at 0.7841 and with NZD/USD sliding 0.63$ to a five-month low of 0.6983. Investors were still digesting news of a new Labor coalition, formed by New Zealand Prime Minister-elect Jacinda Ardern. Meanwhile, USD/CAD rose 0.22% to trade at 1.2513. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.41% at 93.38 by 02:15 a.m. ET (06:15 GMT).

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