House vote on the budget got through narrowly yesterday leading to dollar strength. This vote ensures that the Trump tax cuts can pass without democrat votes. But there is enough strife within Republicans to still create issues with the tax cut bill. Next steps, the congressional tax committee will present a draft on tax cuts on 1st November, which will again be put to vote. Commentary suggests that if the bill has to go through then it will become law by 23rd November. The tax cuts would lead to significant reduction in corporate tax at the same time incentivising repatriation of global profits of US corporations back into the US, leading to USD buying. Thus it seems that the markets are going to spend the next 1 month in positive dollar expectations and I would go with the flow.
Today we have the US GDP where consensus is 2.5% but recent data has taken GDP tracking higher to 2.7%+. This could bring in further dollar strength. EURUSD has broken key levels and now can accelerate towards 1.1550. USDJPY weekly closing above 114.80 can lead to another 2% upside.
With dollar strength globally USDINR is unlikely to go lower. USDINR 1m NDF is trading flat now while EM currencies have depreciated overnight along with EURO and dollar strength. CMP 65.01, Range 65.10-64.94.
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