The British pound has posted slight losses in the Tuesday session. In North American trade, GBP/USD is trading at 1.3451, down 0.22% on the day. On the release front, British Services PMI disappointed, slowing to 53.8 points. This missed the estimate of 55.2 points. In the US, ISM Non-Manufacturing PMI slowed to 57.4, missing the estimate of 59.2 points. On Wednesday, the US releases ADP Nonfarm Employment Change, the kickoff to several key employment indicators late in the week.
Just when the Brexit talks appeared to be on track, hopes of a major breakthrough were dashed on Monday. There had been hopes of a major announcement following a meeting between Prime Minister May and European Commission President Jean-Claude Juckner. However, it became apparent that wide gaps remain on two key issues – Northern Ireland and the European Court of Justice. With the UK leaving the European Union, something will have to be done about the border between Northern Ireland and Ireland, as the latter is a member of the EU. Another wrinkle is that the UK could put up a border with Northern Ireland, but the DUP, which is propping up the May government, is strongly against any border between the UK mainland and Northern Ireland. The second issue is whether the European Court of Justice will have a role protecting European citizens in the UK. The EU is in favor of a role for the court, but many British lawmakers feel that such a move would impinge on British sovereignty. The EU holds a key summit on December 12, and May, who is facing pressure at home over her handling of Brexit, is anxious to wrap up the non-trade issues and move on to trade talks by that date.
The US Senate passed a tax reform bill on the weekend, but the vote was a razor thin 51-49. The vote went along party lines, with one Republican voting against the bill. Now that that the House and the Senate have passed tax bills, a conference committee will try and hammer out a uniform bill which can be sent to President Trump and signed into law. There are some differences in the two bills, notably individual tax rates, the alternative minimum tax, mortgage interest deductions and the estate tax. The Senate and House will have to work out their differences quickly, as the new "merged" bill will have to pass through in both houses. If the bill does become law, it will mark the first major tax reform in the US in 30 years, and could boost the US dollar against the euro and other major currencies.
