USD: Progress on fiscal reforms could provide support - Rabobank

A potential factor that could provide the US dollar with support would be progress on fiscal reforms, according to analysts at Rabobank.

Key Quotes

“In the coming weeks President Donald Trump will be traveling across the US reportedly visiting as many as 13 states promoting comprehensive tax reform. In an interview with CNBC Treasury Secretary Steven Mnuchin insisted that a tax reform plan will be passed this year, despite the fact that Congress and the White House have not released any specific details yet. Finding a compromise could prove difficult given the alleged lack of trust between the President and Republican congressional leaders after Donald Trump shocked Republicans by unexpectedly agreeing with Democrats to extend the debt ceiling earlier this month. It seems still unlikely that tax reforms will be approved by the end of the year. That said, market sentiment towards the US dollar is so negative (short USD is the third most crowded trade according to the recent survey by Bank of America Merrill Lynch) that any signs of progress on taxes, infrastructure projects and deregulation could trigger a bigger correction in G10 and EM currencies against the US dollar.”