The British pound is showing limited movement in the Tuesday session. In North American trade, GBP/USD is trading at 1.3367, down 0.12% on the day. There are no British indicators on the schedule. In the US, Building Permits and Housing Starts both beat expectations. There was more good news as the US current account deficit in Q3 dropped to $101 billion, easily beating the estimate of $116 billion. This marked the lowest deficit since 2014. On Wednesday, BoE Governor Mark Carney testifies before the Treasury Select Committee in London, and the US releases Existing Home Sales.
Mark Carney will be discussing the November Financial Stability Report before a parliamentary committee on Thursday, but lawmakers are likely to press him on inflation, which is currently at 3.1%, its highest level since March 2012. Carney is obligated to write an open letter to the British finance minister, explaining how the BoE plans to lower inflation closer to the Bank’s target of 2.0%. The BoE has not made much headway in taming inflation, and his testimony and open letter may not provide any satisfactory answers. If inflation continues to run above 3%, Carney will be under strong pressure to raise rates, even though the economy could be facing difficulties ahead, especially with Britain departing the European Union in March 2019.
After frantic efforts by Republican lawmakers in recent weeks, the US tax reform bill appears to have enough votes to become law. The House and Senate reconciled their versions of the tax bill on Friday, and the uniform legislation is expected to be voted on in the House and the Senate later on Tuesday. With Democrats in both branches opposing the bill, the Republicans will need every vote in the Senate, where they have a razor 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.
