The euro has started the week with gains. Currently, EUR/USD is trading at 1.1805, up 0.20% on the day. On the release front, German Ifo Business Climate dipped to 117.2, short of the forecast of 117.6 points. In the US, today’s key event is Building Permits, which is expected to slow to 1.25 million. We’ll also get a look at Current Account and Housing Starts. On Wednesday, Germany releases PPI and the US publishes Existing Home Sales.
Germany’s political landscape remains unclear, as coalition talks continue at a snail’s pace. President Angela Merkel’s conservative bloc suffered losses in the September election, and talks with smaller parties proved fruitless. Merkel has now shifted her efforts at her previous junior coalition party, the Social Democrats (SDP). On Friday, the SDP voted to begin exploratory talks with Merkel, with a view to discussing substantive issues in January. Many SDP lawmakers want a more senior role for the SDP in any coalition, and the SDP will likely demand key portfolios in a new government. Despite the political uncertainty, the German economy continues to look very strong.
President Trump’s tax reform bill appears ready to sprint across the finish line, thanks to feverish efforts by Republican lawmakers in recent weeks. After the House and Senate reconciled their versions of the tax bills, the Republicans hammered out the sticking points and reconciled the bills. The uniform legislation is expected to be voted on in the House on Tuesday and the Senate on Wednesday. With Democrats in both branches opposing the bill, the Republicans will need every vote in the Senate, where they have a thin 59-41 majority. Several Republican senators who were undecided have said they will vote in favor, so the bill is likely to pass through Congress and will then be signed into law by President Trump. This marks the first major overhaul of the US tax code in 30 years, and would represent a huge victory for Trump, ahead of Congressional elections in 2018.
