USD: 3 Reasons Why US Tax Reforms A ‘Big Deal’ To Support USD In Early 2018 – BofAML

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The United States Congress is getting closer to approving a deal on reconciling the tax bills and announcing a huge cut in taxes. How will it move the dollar? Here is the view from Bank of America:

Here is their view, courtesy of eFXnews:

Bank of America Merrill Lynch FX Strategy Research discusses the impact of the US tax reform on markets and makes the case on why it will likely trigger USD gains in early 2018.

“We have been arguing that the US tax reform is a big deal and will support the USD in early 2018 for the following reasons:

1- It includes substantial fiscal stimulus, at a time when the US economy does not need it….

2- It could lead to more Fed hikes. Even without tax reform, we expect three hikes by the Fed next year, consistent with the dot plot. With tax reform, the Fed may hike four or even five times next year. The market is still pricing only three hikes in 2018-19….

3- It will trigger substantial profit repatriation. After paying the lower tax on the stock of cash abroad, there is no reason for US companies not to bring, at least, some of this money back home,” BofANL argues. 

We expect the USD to strengthen early next year, as the market will buy the tax reform fact, after having sold the rumor,” BofAML concludes. 

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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