Dollar firmer as US Senate passes tax bill

The dollar is firmer against the euro this morning after the US Senate passed the Republican tax reform bill over the weekend. It is trading at around $1.1850, having been above $1.19 through much of Friday. European equity markets have responded positively to the news, opening about 1% higher this morning, while bond yields are also edging higher

The Senate vote follows hot on the heels of the House passing its tax reform bill, and increases the chances (though it’s still not certain) that an agreed unified package will come into law next year.  While the Fed says the US economy does not need a ‘fiscal stimulus’ at this juncture, given it is effectively operating at full employment, it may still get one!

Sterling is trading at around 88p to the euro ahead of today’s working lunch between UK PM May and the EU’s Juncker, which it is hoped will help move the Brexit negotiations on to the next phase. However, reports this morning suggest agreement has yet to be reached on a ‘formula of words’ in relation to the Irish Border issue

Fed’s Dudley says there is a reasonable case for an interest rate hike at this month’s monetary policy meeting (12th/13th), as the market eyes a 25bps hike

Data due this week include services PMIs in the main economies (tomorrow) and the US employment report (Friday)