Trump administration releases tax plan, US GDP figure in focus

September 28, 2017

Quite a hectic day and night ahead for markets, with central bank speakers and crucial US data to dominate headlines, along with a new tax plan for the US to be dissected by analysts.

The tax plan that was unveiled in the early hours of this morning is wide-ranging and quite ambitious. The plan calls for a lowering of the corporate tax rate from 35% to 20%. Other measures include collapsing the seven personal tax brackets to three (12%, 25% and 35%), the doubling of the standard deductions and a substantial increase to the child tax credit. The news has been received positively by Wall St, but it will be crucial to see if the money saved by business flows through the economy in the way of more jobs, higher wages and increased investment.

The USD continues to strengthen against a basket of currencies, as businesses and markets looked kindly upon Trump’s new tax plan. The EUR/USD pairing continues to fall, its currently trading at $1.1748. The GBP/USD fell further, down half a cent to $1.3398. The AUD/USD seems a far cry from the 81 cents it was pushing last week, where it is currently at $0.7848.

US stocks had a field day on the back of the new tax plan, with the NASDAQ being the best performer, up 73.10 points (+1.15%) to end the trading session at 6,453.26. The S&P 500 added 10.20 points (+0.41%) to close at 2,507.04, while the Dow added a modest 56.39 points (+0.25%) to finish at 22,340.39. Major European stocks all ended in positive territory, the FTSE and DAX posting healthy gains of 27.77 points (+0.38%) and 52.21 points (+0.41%) respectively. At the close, the FTSE ended on 7,313.51 while the DAX finished at 12,657.41.

Gold continues to get belted by markets as investors shun the metal and turn to equities. Gold fell over $10 again as the tax plan has markets excited about more money for business. The precious metal is currently trading at $1,286.60.

Turning to events of today and the early hours of tomorrow morning, and the most significant data to come out tonight is the US Final GDP figure later tonight. This figure is for the previous quarter, so this figure would not reflect the damage to economic growth that the recent hurricanes in the US have inflicted. BoE Governor Mark Carney, BoJ Governor Haruhiko Kuroda, Fed Reserve Member Stanley Fischer and RBA Assistant Governor Guy Debelle are all due to speak.

Other announcements today include:

Europe – German GfK Consumer Climate, German Prelim CPI

US – Unemployment Claims, Final GDP Price Index, Goods Trade Balance, Prelim Wholesale Inventories, Natural Gas Storage