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Taxing times, again

| Posted by: Paul Donovan | Tags: Paul Donovan

  • US President Trump suggested that further US tax increases are likely – specifically the 25% tax on USD 200bn of things partially made in China. Trump also suggested additional products could be taxed (including iPhones, the largest share of which is made in the US). Markets have taken this fairly calmly, presumably viewing this as a negotiation tactic.
  • US President Trump criticized the interminably tedious process of the UK-EU divorce, suggesting that a UK-US trade deal was less likely. The reaction to this intervention might possibly rally some support for the deal (Trump has a 68% disapproval rating versus 20% approval in recent UK polls).
  • ECB President Draghi was dismissive of recent sentiment surveys, focusing on the real economy as the reason why quantitative policy bond buying should conclude in December. There are four US Federal Reserve speakers on the agenda today with a range of policy views. A December US rate hike is economically necessary.
  • Low oil prices continue, with Brent crude around USD 60 per barrel. This will lower inflation pressures – but it is refined petrol (gasoline) that matters to consumers. Crude oil prices do affect international capital flows to and from oil producing countries, which may be relevant for foreign exchange markets.