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Once again, the tax reform is the investors' center of attention. A mentioned earlier, there will be a discussion of tax reform this week which is a decision that must be taken in the US Congress. The House of Representatives and the Senate must assent and agree on all conditions when it comes to the reformation process where they wanted to be accepted by the White House before the year ends.
However, few U.S. neighbors are satisfied with this kind of reform. Yesterday, European finance ministers made comments in a letter that was sent to US Treasury Secretary Mnuchin. This letter was signed by the finance ministers of France, Germany, Italy, Spain and the United Kingdom. It says that plans of the U.S. plans can contradict the agreements on double taxation and WTO rules, and the U.S. tax plan can have a serious negative impact on the international trade.
The European currency reacted with a drop of all news in the absence of an important fundamental background.
At the same time, the US Treasury stated that the economic reforms planned by the Republicans would compensate for the US economic growth through losses related to tax cuts. It is expected that as a result of the Republican plans' implementation, the GDP growth will be 2.9% and not 2.2% in the long-term which is similar in the former forecast.
Many leading economic agencies, as well as large banks, are confident that the adoption of the tax bill will put significant pressure on the European currency and other types of risk assets, which will lead to an upward trend in the US dollar. A good increase in U.S. inflation and consumption may also result in a higher probability of further interest rate hike from the Fed. On the other hand, the policy of the European Central Bank will remain soft enough.
Yesterday afternoon, the data on the index of employment trends in the U.S. from the Conference Board came out, which declined in November this year. According to the report, the index of employment trends in the U.S. fell to 135.88 points, following an increase in October to 136.23 points.
As for the technical picture of the EURUSD pair, everything remains in place. The upward correction in the trading instrument may continue depends on whether the buyers will be able to hold above the level of 1.1770, which could lead to a reduction in long positions in the US dollar. The euro growth will also reach the area of 1.1810 and 1.1840 which is already closer to the middle of the week. Meanwhile, the sellers aim to keep the new monthly lows around 1.1715.
It is important to give attention on the prices of U.S. producers data for today.
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