The tumultuous week is coming to end, risk appetite has returned amid investors who are set this morning to build a rally to finish the week strong. Thanks to the rising odds of US corporate rate tax cuts and earnings data which has helped Wall Street to regain its mojo and investors over in Europe wants to bank on this.
The US dollar index had an interesting ride overnight, traders pushed the dollar index on the back of the news that Donald Trump's campaign team was served with a subpoena last month requesting them to hand over the documents relating to Russia. Mr Muller, who is leading the investigation into Russian interference during the US election, used his power for this request. Russia meddling in the US election remains a sensitive issue and it appears until the investigation doesn't close, Mr Trump would need to watch his back and so does the dollar bulls. The drop in the dollar index brought the momentum for the Yen, Pound which hit multi-week highs.
On Thursday, we have seen some signs of progress on tax reforms, the only thing which brought some life to the dollar index yesterday. House of Representatives finally decided to push the tax bill further and president Trump drummed up the beat on this by taking it to the Twitter. However, the challenge remains if the Senate will remove the resistance towards the tax reform as they are still working on it. It is highly likely that the bill may not see the daylight until the first quarter of the next year.
Self-imposed deadline by Angela Merkel, the German Chancellor, to form a coalition this week, is keeping the euro currency traders on their toes. The answer to the question which investors are seeking is if she can pull this off? Restless efforts by her have increased the odds that she may get good news and there is a momentum to have a deal. Perhaps, the true leader of the free world would be able to pull this off.
The German Chancellor isn't expected to attend the EU's summit today where Theresa May, the U.K. prime minister, will try to resume the Brexit talks. However, with Merkel not being there, she may not be able to see the kind of colours which she expects. The deadlock in the Brexit negotiations and no meaningful progress has brought dark clouds for the UK's economy. Lloyd Blankfein, the CEO of Goldman Sachs, has given a clear message yesterday that banks would support another Brexit referendum. Perhaps, May should listen and pay attention what businesses want and make sure if leaving the EU block is something which public really wants.