One week after I warned that the US House of Representatives tax plan would be a disappointment for USD bulls due to a lower than expected tax holiday, more disappointment emerged yesterday. Will the 1-year delay really matter? Full analysis here.

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Markets were pushed and pulled on leaks and reports from tax plans Thursday in a clear sign of what's at stake. The Swiss franc was the top performer while the New Zealand dollar lagged. New RBA forecasts are due up later. 4 of the  7 Premium  trades are currently in the green.

التنفيذ بعد التأجيل (فيديو للمشتركين فقط)

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Markets soured on signs the Senate would ask for a one-year delay in cutting corporate taxes to 20% on Thursday but the mood had improved by late in the day on signs the legislation could pass.

There is a balance between how favourable the plan is for business and the economy versus the likelihood of success. The initial reports of a one-year delay in the corporate rate sent the S&P 500 down as much as 26 points and USD/JPY as low as 113.10 – the worst in a week.

Signs of support from influential Senators late helped to boost USD/JPY back to 113.50 and the S&P 500 closed down 10 points.

At the same time, other markets were pulled in different directions. There was a sizeable slump in Eurozone sovereign bonds and that pushed 10-year yields up roughly 5 bps throughout the continent and narrow spreads with Treasuries. That gave the euro a half-cent boost.

In Japan, we will be watching the Nikkei very closely in the day ahead. It surged to the highest since 1992 on Thursday before reversing to close slightly lower. The selling continued in the futures market in a nearly 4% drop from the peak.

Aside from that, Australian dollar risks will be high at 0030 GMT when the RBA will update its forecasts on growth and inflation in the Statement on Monetary Policy.

تحليل خطة الضرائب الأمريكية، تصاعد الشكوك في الوضع السياسي في المملكة المتحدة

Slight shifts in central bank rhetoric highlight the uncertainty in central banks and markets. The New Zealand dollar was the top performer on the day while the pound lagged. Chinese CPI is due up next. Below is the latest Premium video on the existing and potential trades.

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Central banks have been playing a game for years. The aim is to keep the domestic currency low while controlling inflation and instilling confidence in the broader market. That paradigm frequently leads to mixed messages. In addition, policy makers often quickly backtrack when hawkish moves lead to a spike in the currency.

The stakes were on full display in the RBNZ decision. The central bank has long pledged to remain accommodative for a considerable period so it was no surprise when rates were left at 1.75%. The unexpected move was a shift in the forecast for inflation. They now see rates rising in Q2 2019 compared to Q3 previously. That was enough to send the kiwi to 0.6966 from 0.6925.

The market emphasis on forecasts isn't new but it's increasingly prevalent. The kneejerk reaction to the FOMC is now more about things like the dots than the words in the statements. In the longer term, we suspect central banks will be irked by the increasing irrelevance of written language versus forecasts but for now, the data domination is the main trade.

Up next is the CPI report from China, which is expected to accelerate to 1.8% from 1.6%. The data is due at 0130 GMT and it's a reminder that even in emerging markets where growth is near 7%, inflation isn't a formidable problem. That said, a surprise uptick about 2% could make waves in broader markets.

هل ستصمد المقاومة الهامة على زوج الدولار ين عند مستويات114.30,و ماذا بعد تجاوزها ؟ الفيديو الكامل

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The US dollar falling off its Tuesday highs and equity futures are off (SPY -6, DOW Futures -35) on Washington Post report that US Senate Republicans may delay the corporate tax cuts by 1 year. But details could change ahead of Thursday's formal release of the bill by the Senate Finance Committee. The euro slumped again Tuesday but a late-day bounce showed the next move could be drawn out. The US dollar was the top performer on the day while the New Zealand dollar lagged. The Asia-Pacific calendar is light but Trump is in South Korea and could stir up geopolitical risk. The EURUSD and FTSE trades were stopped out befor a new trade has been posted in a major index (before the Tax story broke).

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EUR/USD touched 1.1553 before bouncing 30 pips to finish narrowly lower on the day. At the lows, it was the worst level since July 19. Most importantly, it helps to reaffirm the head-and-shoulders top on the chart.

The danger sign for the pair is bonds. US 10-year yields edged lower to 2.31% as they continue to fall away from the key 2.40% level. The low was just below the 200-day moving average. Economic data was limited to JOLTS at 6.093m, slightly better than the 6.075m consensus.

On the whole, the US economic calendar is light this week but the political calendar is busy. The House is aiming to pass the tax cut bill this week. The headlines are likely to be positive for the US dollar but the mood may quickly shift if it encounters problems in the Senate.

Oil is also a key focus as Saudi Arabia continues to crack down. On Tuesday, dozens of bank accounts were frozen but the oil market retraced a portion of Monday's big gain in part because of higher US inventories and a warning from OPEC that shale production could ramp up once again.

Trump will be a risk in the day ahead as he meets South Korean President Moon. Initial dialogue and comments were more constructive on the possibility of a deal with North Korea but the mood could shift any moment.

Major political upheaval is underway in Saudi Arabia after dozens of top officials were arrested on Saturday along with a series of other events that are unlikely to be a coincidence. The Canadian dollar was the top performer last week, while the pound lagged. CFTC positioning showed a shift against commodity currencies. A new Premium trade has been issued on a commodity currency, backed by 3 supporting charts.

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Thirty-two year Prince Mohammed bin Salman continues to tighten his grip following his rise to Crown Prince in June. A series of arrests on Saturday, ostensibly for corruption, threaten major turmoil in the Kingdom. The arrests included 11 senior princes, a former finance minister and Prince al-Waleed bin Talal, who is the richest man in the Arab world and the largest shareholder of Citigroup. The head of the National Guard was also removed.

Also on Saturday, a missile was shot down near Riyadh while on Sunday a helicopter carrying Mansour bin Muqrin crashed. His father had been in-line to succeed King Salman until 2015.

This all comes just a week after Trump's son-in-law Jared Kushner made an unannounced trip to Saudi Arabia and on Saturday Trump tweeted asking Aramco to launch its IPO in New York. Lebanese PM Hariri's announced resignation on Friday on the grounds that it is no longer safe to remain on the post may be related to the Saudi equation as the Kingdom has long served as a safehaven to the PM and his family.

We struggle to believe this is all a coincidence but what comes next is equally opaque. The turmoil could be followed by assassinations and internal strife or Bin Salman could successfully tighten his grip on all the levers of power. For now, the present is developing quickly and the future highly uncertain.

Domestic market signals may also be tough to interpret. Saudi stocks fell 2.2% early but finished up 0.3% in what was likely government buying.

Late on Friday, WTI crude broke out to the highest since January 2015 and – once again – we can't dismiss that as a coincidence.We will be watching very closely in the days ahead.

CFTC Commitments of Traders

EUR +72K vs +84K prior GBP +1vs -1K prior JPY -119K vs -116K prior CHF -21K vs -12K prior CAD +58K vs +72K prior AUD +52K vs +57K prior NZD -6K vs +1K prior

The head-and-shoulders pattern in EUR/USD along with the resurgent US dollar placed substantial euro positions in jeopardy. Commodity currencies also remain in a precarious position despite last week's bounce. With the BoE decision out of the way and no more hikes coming in the near term, expect to see a slow build in GBP shorts unless the Brexit rhetoric improves in the coming 6 weeks.

Here is why last week's Tax reform bill from the US House Republicans is far from what USD bulls hoped it to be.  Full analysis.