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The proposed 20% corporate tax rate will not be implemented until 2019, according to US Louisiana Senator Bill Cassidy. Additionally, the bill will keep all seven tax brackets instead of cutting it down to three.
The crucial tax cut is disappointing news for US-based markets as Republicans have suggested that the corporate tax cut would fuel economic growth through corporate spending. Hence, by this logic a delay in the 20% tax rate would delay a boost to economic growth in the US.
The House of Representatives is under pressure to pass the bill before the end of the year. In an effort to do so, House Speaker Paul Ryan stated that the bill will be put to a vote in the house “later today.” Also, an Obamacare mandate repeal is still being considered to free up an estimated $338 billion in government revenues.
Chart 1: DXY Index 15-minute Chart (November 8 to 9, 2017 Intraday)
Following the news from Senator Cassidy, the US Dollar Index came under pressure falling to a new intraday low. DXY hit 94.49 before rebounding to 94.54. Given that the expected impact from tax reform would increase inflation vis-à-vis deficit spending, lack of progress on the legislative front means investors are likely to see softer US Treasury yields, and thus, the US Dollar.
--- Written by Dylan Jusino, DailyFX Research