The USD gained against commodity currencies but was soft against safe havens given the political situation in Washington. The Trump Administration scored a major victory with Congress passing the tax overhaul bill by a vote of 227–205. The Senate proposal will be voted after Thanksgiving and diverges from the congress version with Republicans aiming at passing both and consolidating into a single bill. The positive momentum from the legislative victory was short lived as it emerged that Special Council Muller subpoenaed the Trump campaign regarding its ties to Russia.
Politics will play a big part during the week as the UK Prime Minister’s authority has been questioned and could end in a no confidence vote with sterling traders looking for more clues on this development. Brexit negotiations are ongoing but there have been a recent string of concerns regarding how well thought out the whole divorce strategy really is.
The U.S. Federal Reserve will publish the minutes form its November meeting on Wednesday, November 22 at 2:00 pm EST. There will be more clues on where certain policy makers stand regarding inflation, but the market is still pricing in a 99 % probability of a US rate hike in December. With the US market closed on Thursday and Friday due to the Thanksgiving holiday European PMI releases on Thursday, November 23 could boost the EUR if the string of positive data continues in Europe.
The eurozone economy continues to perform well in the third quarter. German GDP accelerated to 0.8%, while Eurozone Flash GPD remained steady at 0.6%. However, inflation remains the fly in the ointment, with levels well below the ECB target of around 2 % . Weak inflation has kept the ECB cautious regarding its monetary stimulus program. The ECB said in October that it would chop asset-buying from EUR 60 billion to 30 billion each month, but added that it was extending the scheme until September 2018. Jens Weidmann and other senior policymakers want the ECB to act more aggressively, and have called on the ECB to announce a termination date to its stimulus program. However, Mario Draghi appears in no rush to wrap up the scheme, especially with no inflation pressures on the eurozone economy. With Draghi and Weidmann holding different views on stimulus, it will be interesting to hear both central bank heads speak at the same event on Friday.
The NAFTA fifth round of talks have entered its second day and for this round the Trade Ministers from the three nations will not be present. They held talks at the APEC Meeting in Vietnam. This could free up the negotiators to move forward in the renegotiation of the Trade agreement with less political interference. Ministers might also not be present in the sixth round held in Washington.
European Central Bank (ECB) President Mario Draghi will be speaking on Monday, November 20 at 9:00 am EST during his testimony before the European Parliament. He is not expected to wander too much from the comments he made earlier today. He has reiterated the need for patience when normalizing monetary policy. Europe has posted strong numbers, but inflation remains an area where gains have lagged.