Sun, Jan 17, 2021 @ 19:19 GMT
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Tax Reform

Japan’s Consumption Tax Hike Unlikely to Help Inflation Much

japan's inflation has stayed very weak. Despite hopes that the upcoming increase in consumption tax could boost the general price levels, the impact this time is likely limited. Tokyo CPI signals that Japan’s inflation outlook remains dismal.Although consumption tax hike in October might boost inflation, the impact is expected to...

US Mid-Term Elections: Divided Congress Means No Changes To Economic Policy

Key takeaways With a divided Congress, we should not expect changes to economic policy and hence we maintain our view that the implications for the economy and markets should be limited. US expansion is set to continue. Trump has criticised the Fed but it is likely to continue its...

Yen Lower as Risk Aversion Recedes, Canadian Dollar Awaits BoC Hike

Despite initial steep selloff, US equities staged a strong rebound before close and closed just slightly lower. The turnaround in sentiments carried on in Asian session with major indices all trading in black. With receding risk aversion, Australian and New Zealand Dollar are trading as the strongest one for...

House Brady agreed to work on 10% middle class tax cut

House Ways and Means Committee Chairman Kevin Brady, Republican, said in a statement to work with the White House on delivering the 10% tax cut for the middle class. In the statement, he said "resident Trump believes American families deserve to keep more of what they work so hard...

Markets shrug Trump’s unsubstantiated tax cut for middle class

Trump talked about the plan to give middle class 10% tax cut yesterday. He said "we're putting in a resolution some time in the next week and a half to two weeks we're giving a middle-income tax reduction of about 10 percent." He insisted that the plan will...

The Midterm Elections and Our Economic Outlook

Executive Summary The 2016 United States election was a landmark event, and its impact has rippled through nearly all asset classes and the domestic and global economies. On November 6, 2018, Americans will go back to the polls for the midterm elections. Might this round of elections have similarly significant...

Democrats Might Regain Control of House, And Then?

Opinion polls suggest that the upcoming US midterm elections, scheduled on November 6, would lead to a split Congress – Democrat regaining control of the House and Republic retaining majority of the Senate. Such outcome could lead to political gridlock and more vigilant oversight of Trump’s administration. Yet, the...

Sterling Strong on Brexit Optimism, Look into Job Data for Further Strength

Yen and Dollar are trading as the weakest ones in Asian session as risk aversion receded. In particular, Nikkei rebounds over 1% as concerns eased about last week's typhoon and earthquake. Canadian Dollar is the strongest one at the time of writing, followed by Australian Dollar and Sterling. But...

US House Republicans released Tax Reform 2.0 as political move

In the US, House Republicans released the so called "Tax Reform 2.0" yesterday, aiming to put it to committee-level vote this Thursday, and a full House vote on October 1. There are three major elements in the new package. Firstly, the temporary individual rates lowered in the December tax...

Sunset Market Commentary

Markets Global core bonds traded mixed today with US Treasuries stabilizing near Friday’s post-payrolls sell-off lows and German Bunds ceding more ground. The first down leg in the Bund occurred as Italian BTP’s extended their strong run after reassuring comments from Italian FM Tria over the weekend. He said that...

Fed: US firms repatriated USD 300B offshore funds after tax cut, but not for investment

In a note titled "U.S. Corporations' Repatriation of Offshore Profits", Fed studied how companies used the cash holdings outside the US after the Tax Cuts and Jobs Act. Under the new act, tax disincentives on the repatriation of foreign earnings were eliminated. Fed found that US firms repatriated just over...

Weekly Economic and Financial Commentary: Lackluster Growth in Some Foreign Economies in Q2

U.S. Review Prices Continue to Advance Consumer prices increased 0.2 percent in July, advancing to 2.9 percent on a year-to-year basis, the strongest pace in six years. The core CPI index also rose a strong 0.2 percent, bringing the year-to-year rate to 2.4 percent. The Producer Price Index showed no...

Keeping Score: Reexamining the Tax Bill’s Impact

Executive Summary Fiscal stimulus has been one of the key drivers of our outlook for faster economic growth this year, with the recently enacted Tax Act playing a major role.1 Over the course of 2017 as the tax bill was taking shape, we were asked three questions regarding the tax...

FOMC Minutes: Fiscal Stimulus During Full Employment Facilitates Inflation to Reach +2%

The FOMC minutes for the March meeting reinforced the members’ confidence over the economic growth outlook and that inflation would return to the +2% target in the medium-term. The confidence was mainly driven by the tax reform plan passed late last year as well as passage of the Federal...

Were Corporate Tax Cuts Evident in Fourth Quarter Profits?

The anticipation of tax-reform could have influenced fourth quarter profits. Tax reform will likely lead accelerated profit growth in the year ahead, even as pre-tax profit growth remains muted. The Tricky Effects of Tax Cuts The third release of fourth quarter GDP not only revised overall growth up to 2.9 percent...

US Dollar Mixed In Anticipation Of Tax Reform Legislation

The US dollar is mixed against major pairs on Wednesday after the tax reform bill had to go through another round of voting due to last minute changes on the Senate approved bill. The news did little for the greenback as the market is already pricing in the tax overhaul becoming legislation with the timing not that crucial. The USD is higher against the JPY and the CHF, but depreciated against the CAD and the EUR.

The Tax Cuts & Jobs Act: Short-term Gain = Long-term Pain

Republicans in the Senate and the House have passed a compromise tax reform bill that will soon be passed into law. At a total cost of $1.5 trillion over ten years, it will provide a modest short-term boost to the U.S. economy, but not enough to offset the full cost of the plan. As many provisions of the tax cuts expire and higher interest rates weigh on growth, the plan will switch from stimulus to economic drag over the medium term. Barring severe spending cuts to pay for the tax cuts, the U.S. debt-to-GDP ratio is expected to rise above its already worsening outlook.

Brexit to Remain the Dominant Theme for Sterling in 2018

Sterling staged a modest recovery in 2017, on the back of a rate hike by the Bank of England and some noteworthy, albeit slow, progress in the Brexit talks. Even though monetary policy has been supporting the currency in recent months, it is an open question whether this will remain the case moving forward. Moreover, the Brexit negotiations have only just entered their second and perhaps most crucial phase, where the two sides will discuss the all-important trading relationship. Numerous political uncertainties persist, and until the smoke clears, one could argue that any rallies in the pound may remain relatively limited.

US Tax Bill To Be Ratified, Japanese Equities At Multi-Decade High

The dollar was not much changed versus a basket of currencies as markets awaited the House of Representatives to cast a final vote in favor of tax reforms later today. The euro was roughly flat after receiving a lift from higher German bond yields.

Tax Reform $ Bounce

Foreign Exchange Traders were getting very edgy in Asia yesterday amid holiday-thinned markets with little impetus one way or the other, but thankfully there was some news to sink their teeth into overnight. The dollar was firmer against most currencies in NY helped along by robust U.S. housing data, and a steeper US Treasury curve with 10-year yields rising to 2.47%.The move came after Fed's Robert Kaplan told Bloomberg TV that a flattening yield curve was limiting the Fed's “operating flexibility.” Having interest lower for longer certainly curbs the Feds ability to use the traditional monetary policy tools when or if the economy takes another downturn, and this has been a long-held view by dollar bulls.

Tax Reform Spurs Santa Rally

US equity markets are on course to open higher again on Friday, once again pushing for new record highs as tax reform edges ever closer. Tax reform was one of the key initiatives that contributed to Donald Trump's election victory last year as he vowed to revitalise a sluggish US economy. While it may have taken longer to deliver than he expected, it would appear that Republicans determination to give Americans an early Christmas present has paid off, although there has been numerous debates about who actually stands to benefit most from the bill.

US Tax Bill On Final Stage, European Stocks Hold Strong

The dollar was steady versus the yen at 112.62 as investors were waiting for the final tax vote to begin today, while trading was in general thin ahead of the holiday season. The euro, on the other hand, posted moderate gains versus the greenback, edging up to an intra-day high of 1.1817(+0.23%) and remained flat against the pound at 0.8832 as the German Ifo business climate index inched below expectations but remained at record high levels in December. The pound fell back to yesterday's lows, trading at $1.3370, while the aussie and the kiwi consolidated around today's highs.

US Tax Bill Heads For Vote, Aussie Up On Mostly Upbeat RBA Minutes

The dollar was slightly lower versus a basket of currencies as trading conditions were getting thinner ahead of the holiday period and attention remained on the tax story in the US. The antipodeans kept edging higher versus the greenback though their gains were subdued on a day with no sharp movements among major pairs.

Tax Bill To Become Law This Week

December has been historically a good month for equity markets. Many traders bet on the Christmas rally as a seasonal trend to benefit from. Data from 1928 shows that December has been mostly a good month for the S&P 500. It was never the worst performing month and was the best performing month four times. This time, the rally has been fueled by optimism that U.S. lawmakers are on the brink of passing a historic bill to overhaul the U.S. tax code.

Dollar Falls on Tax Doubts as Stocks Climb; May Plans on Transition Period

The dollar was weaker versus a basket of major currencies during early European trading hours as investors played down the post-growth effects of the proposed tax cuts. The dollar index touched intra-day lows at 93.68 (-0.26%). Euro/dollar was on track to break above 1.1800, reversing most of its Friday's losses (+0.31%), as sentiment on the Eurozone's economy remained positive. Dollar/yen was flat at 112.56 and pound/dollar was trading higher at 1.3360 (+0.32%).

US Tax Reform Dominates Attention, Appetite For Risk Pushes Equities Higher

The dollar was slightly down against a basket of currencies after posting gains on Friday following the announcement that House and Senate Republicans have found common ground on the front of tax legislation. The antipodeans were again gaining ground versus the greenback.

Global Stocks Dip on Tax Reform Jitters, Gold Shines

A sense of caution was felt across financial markets during Thursday's trading session as concerns surrounding the progress of U.S. tax reforms resurfaced. Asian stocks were mostly lower early trading on Friday thanks to this growing uncertainty, while the lack of risk appetite exposed European shares to further losses. With Asian and European markets gripped by U.S. tax reform jitters, Wall Street could come under pressure this afternoon as investors scatter away from riskier assets to safe-haven investments.

Senate’s Tax Bill Vote Fails To Impress Dollar Bulls

Despite U.S. equities closing at new records on the tax breakthrough, it was interesting to see the dollar retreating slightly against its major counterparts. It seems investors are still anxious about how the Senate will reconcile its tax bill with the House of Representatives before it goes to President Trump to sign it into law. There's no doubt the differences between both Houses are vast. However, it's in the best interest of the Republicans to get the deal done, or they risk losing the majority in November's 2018 election,and this is why it looks like just a matter of time before the final bill reaches Trump for his final blessings. This scenario will probably continue to provide the greenback support for the remainder of 2017, with pullbacks seen as an opportunity for bulls. However, the longer-term outlook may not be as bright, especially that long-term bond yields are not reflecting stocks markets' optimism. U.S. 10-year bond yields are trading below 2.4% early Tuesday, and the yield curve continues to flatten.

Understanding the Senate Tax Plan’s Dynamic Score

Dynamic scoring has once again entered the news headlines. In this report, we dissect the Joint Committee on Taxation's fiscal and economic analysis and discuss "crowding out," a key factor in dynamic scores.

Tax Package Next Steps: Reconciling Differences

Late last week Senate Republicans passed their version of a $1.4 trillion tax package, while the House passed its version on November 16. While progress on getting a final tax package passed has been made, there is one final hurdle before enactment: the two bills must be reconciled and a single version passed through both the House and the Senate. In this report, we summarize the next steps in the legislative process and highlight the possible sticking points between the two bills. We conclude with a discussion of the bills' fiscal and economic impact.