Global Forex November 10th - On Thursday (November 9th), the global financial market once again experienced a new round of squally baptism, and the dollar and oil prices that had been abnormally high in the past few months have finally split up overnight. . According to market data, the dollar fell to a six-day low against a basket of currencies on Thursday, as investors sold dollars after learning the details of the US Senate Republican tax reform plan. On the other hand, oil prices rose sharply on Thursday, and the oil returned to US$64. The Saudi King’s intention to give the throne to the “Iron Crown Prince†Salman in the first 48 hours made the geopolitical situation in the Middle East once again unpredictable.
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The tax reform has once again broken the dollar longs! Senate tax reform proposal confirmed that the corporate tax will be postponed
Details of the Republican Party’s Republican Party’s tax reform plan surfaced on Thursday, with differences in corporate income tax cuts, state tax and local tax credits, and adjustments to the estate tax of the richest people in the United States. The senators said they want to reduce the corporate tax from 35% to 20%, but in 2019, it is not in favor of immediate effect.
It is reported that Bill Cassidy, a member of the US Senate Finance Committee and a Republican member, said that the Senate's tax reform proposal will delay the reduction of corporate tax for one year and will be implemented by 2019, which will eliminate the mandatory mandatory participation of Obama's medical insurance. Cassidy told reporters that the tax law drafters in the Senate would recommend retaining a seven-person personal income tax rate, which is also different from the plan that the House plans to reduce to four.
Cassidy also said that the Senate plan would not keep the maximum tax rate at 39.6%; but he did not say what the new highest personal tax rate is. The House Tax Reform Act will reduce taxes for almost everyone, but the maximum tax rate is 39.6% for individuals with annual incomes of more than $500,000 or families with more than $1 million.
After the details of the tax reforms of the two houses gradually emerged, the market risk appetite sentiment declined. Investors are worried about the differences between the two hospitals in tax reform, and they are also uneasy about the implementation of the tax reduction of corporate tax in the Senate tax reform. Affected by the negative news of tax reform, the US dollar and US stocks fell rapidly on Thursday. The panic index VIX soared more than 22% in the day. The gold futures once hit an intraday high of $1,289 per ounce.
“The market is somewhat uneasy about the details of the Senate tax reform proposal. It seems that the implementation time for the corporate tax reduction will be postponed for another year,†said Paresh Upadhyaya, director of Amundi Pioneer Investment Management. “The initial reaction of the market to the Senate tax reform plan was disappointment.â€
Analysts say any tax cuts will be postponed, or the possibility that the proposed reforms will be weakened will be detrimental to the dollar.
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Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said: "Nothing this week is more likely to affect the dollar than US bond yields and political headlines." She added that given the obvious differences between the two houses, the "tax reform bill is in the Senate." The approval will not be so fast and so easy, so the short-term USD/JPY may fall to 112.15â€.
French Industrial Bank 601166, Societe Generale interest rate strategist Bruno Braizinha said: "It seems that it may take some time to pass the tax reform bill, and may end in disappointment."
Reuters survey: Whether the dollar can continue to rise, the tax reform plan will be the ultimate judge!
It is worth mentioning that, just before the overnight tax reform, the latest survey of foreign exchange strategists released by Reuters shows that the future of the dollar has risen in the recent situation of the Fed’s future interest rate hike. It depends on whether Congress can pass a major tax reform plan.
Although the Republican Party of the United States hopes to reach a consensus on tax reform before the end of November, it is absolutely uncertain. The latest survey of more than 60 foreign exchange strategists on November 3-8 shows that the dollar is expected to remain stable in the coming year. But the minimum estimate of the exchange rate of the dollar against several other currencies is even more pessimistic than last month's forecast.
About 80% of the more than 50 strategists who answered an additional question said that major tax reforms would boost the dollar, but not everyone believes Congress will pass the plan.
“The dollar is moving steadily, mainly because investors are turning their attention to President Trump’s tax reform plan, and the US Federal Open Market Committee (FOMC) next year’s composition may be more hawkish. We expect the US dollar to The possibility of horizontal upside is limited," Valentin Marinov, head of foreign exchange strategy at the G-Group of 10 (G10) of CA-CIB, said in a research note. "Especially considering that the Fed’s interest rate hike in December has been basically digested."
According to the US Commodity Futures Trading Commission (CFTC), although speculators have reduced their dollar short positions to a 15-week low, the latest data shows that speculators have held net short positions for 16 consecutive weeks.
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"We think the dollar's gains are coming to an end," David Adams, G10's foreign exchange strategist at JPMorgan Chase, pointed out. "The near-term political risks associated with tax reforms have also kept us bullish against the dollar, and most positive tax reforms have been digested. â€
The uncertainty of whether the tax reduction bill can be passed also lowers the inflation expectation and the long-term public debt yield. At the same time, the upcoming interest rate increase pushes up the short-term public debt yield, resulting in the US public debt yield curve reaching the lowest level in 10 years. Trump’s decision to nominate Powell’s next chairmanship of the Fed also stabilized the market’s expectations for the dollar.
More than three-quarters of the more than 50 analysts who answered another question said that after Powell was nominated, the risk to their dollar estimate remained unchanged.
Can the Saudi King retreat within 48 hours? The Middle East version of "Xuanwumen's change" boosted oil prices!
In addition to the latest developments in the US tax reform, another news of the ups and downs in the financial markets overnight came from the Middle East. A number of media reports said that within a week of the biggest anti-corruption storm in the history of the country, the Saudi King intended to give the throne to the "iron crown king" Salman in the first 48 hours. This news has made the situation in Saudi Arabia, which has been heart-wrenched by the anti-corruption storm, even more fluctuating!
It is reported that PressTv.com, which has an official background in Iran, disclosed that the Arab world's digital news and commentary website Rai al-Youm said on Wednesday that the Saudi king will announce the abdication decision within "the next two nights." Saudi Arabia’s TV news channel Al-Arabiya also announced the news on Twitter on Wednesday, but the tweet was subsequently deleted.
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Asad Abukhalil, a professor at California State University's Stanislaus campus and author of "The War in Saudi Arabia: Imperial Power, Fundamentalism, and Global Ambition," said: "I heard that Crown Prince Salman will announce himself in the next 36 hours. The King, the previous large-scale arrests undoubtedly paved the way."
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Analysts pointed out that if the Saudi king gave way, this would make the country rarely enter a turbulent period, and further spread the geopolitical impact in the Middle East, of which Lebanon will bear the brunt.
After arresting some priests who were seen inside the regime in September, the Wall Street Journal quoted a Saudi government adviser as saying, "Muhammad bin Salman is clearly preparing to become a king. He wants to resolve the internals of his becoming king. Debate, focus on consolidating one's power, rather than being distracted by dissidents."
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In the crackdown in September, more than 30 prominent political figures were detained, most of whom were clerics with large social media and extensive influence in the Arab world. The Wall Street Journal also pointed out at the time that "the government has denied the plan to abdicate, but some people close to the royal family said that preparations have already begun. According to informed sources, several people close to the royal family are expected to be held this month. The transfer of power is likely to be held at the end of this year or early next year."
At that time, many professors of history and Saudi affairs expert As"ad AbuKhalil pointed out that the strike was part of a broader campaign targeting insiders and celebrities who threatened to counter the Crown Prince’s vision of Saudi foreign policy. .
Obviously, this week’s political earthquake in Saudi Arabia witnessed the death of two famous princes, the detention of more than a dozen other princes, the freezing of billions of dollars in assets, and even the possible abdication of the king. The interpretation of the change of the door further confirmed the analysis of AbuKhalil.
In terms of market trends, oil prices rose nearly 1% on Thursday, helped by major exporting countries to reduce supply, and continued concerns about the development of Saudi political situation. "The recent trend has been driven by the development of the Saudi political situation and the expectation that King Saleman and the Crown Prince will further consolidate power," said Abhishek Kumar, senior energy analyst at Global Gas Analytics of Interfax Energy. "At the same time, Saudi Arabia’s speech on Lebanon, It also highlights the growing tension between Saudi Arabia and Iran."
It is worth mentioning that CNBC used the hedge fund tool Kensho to calculate the oil price performance for one month after Saudi disputes occurred since January 2011. The results showed that Brent crude oil increased by 2.7% during this period. The average increase in WIT crude oil was 2.29%.
(Editor: Wang Zhiqiang HF013)
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