Is the US about to raise taxes?
- Investors await US President Trump's address to Congress on Tuesday to get a sense of the forthcoming policy agenda. Over the weekend, US Treasury Secretary Mnuchin indicated increased spending, reduced taxes and a smaller deficit (sic).
- It is not clear if Trump intends to raise consumer taxes aggressively via a tariff or border tax. This matters to investors. If the fiscal deficit does increase then (all things equal) the US will be more dependent on foreign financing inflows, rendering the dollar increasingly vulnerable.
- Kaplan of the US Federal Reserve is scheduled to speak, but markets have heard a lot from the Fed of late and are unlikely to be enthused. Durable goods orders data are due along with proxies for capital spending, but these may miss key parts of the investment story.
- Euro area business and consumer confidence data are due - these are just opinion polls with good PR. Euro area M3 money supply is a little more substantial as a data item, as it gives some indication as to how Euro area banks are lending.