The UFP – Unsustainable Fiscal Position

Daily update

The US Senate passed legislation to enshrine an unsustainable fiscal position into law. The bill goes to the House, where it may run into difficulties. Some fiscal conservatives are unhappy with the unsustainable part of US fiscal policy. Markets are not likely to react to squabbles over details—unsustainable US fiscal policy is well understood, and the economic effects of redistributing from lower income to higher income households will take time to emerge.
Trade taxes animate markets a little more. US President Trump has threatened to tax US consumers of Japanese goods more aggressively—but does have a history of not following through on such threats. Japan is very unusual in that its auto sector has absorbed some of the US taxes by lowering export prices (not something other countries, or other Japanese sectors have chosen to do).
The US ADP payrolls data is due—how well this correlates with official payrolls is questionable (how well official payrolls data correlates with reality is also questionable). Labor data still matters, because it matters to the US Federal Reserve.
A European central bank forum gives several central bankers the opportunity to grab the media spotlight (including ECB President Lagarde). It is unlikely any of them will interest investors.