The US dollar lost ground against most of its major peers in early trading on Wednesday, as investors grew more concerned that a tax reform plan that Republicans prepared could be delayed. However, the greenback strengthened against the British pound as demand for the British currency fell due to a new scandal within the British government.
A report on Tuesday suggested that the highly anticipated US tax reform bill may be delayed for as long as a year, which delivered a blow to investorsâ hopes. Republicans in the Senate are exploring a delay in the implementation of the tax reform until 2019, according to four people familiar with a draft of the legislation.
More specifically, Senate Republicans are looking into postponing an $845 billion corporate tax cut, which is the centerpiece of the tax reform plan, for a whole year. The delay, which represents a widely different approach to the tax reform from the one that House Republicans are taking, allows the tax reform bill to comply with Senate rules.
The report added that Republican senators also discussed a removal of state and local tax cuts, which are contained in the suggested bill. In addition, senators debated the billâs effectiveness in giving more benefits to the middle class and less to the wealthy. Investors hope that more information will be made available when Senate Finance Committee Chairman Orrin Hatch announces his proposal tomorrow.
If true, the different approach from Republicans in the Senate will clash with House Republicans and the White House, both of which push for a signed legislation by the end of the year.
The House Ways and Means Committee may hold a vote on the tax bill next week after approving its version of it later this week. The Senate and the House must approve identical tax bills before President Donald Trump can sign the final legislation.
Confidence in the Trump administration between investors further weakened following the report, since a failure to deliver the promised tax cuts would be a major blow to market sentiments. The waning confidence in the president and his administration also hit his approval rating, which was at 37% according to a new opinion poll.
After beginning his presidency with big promises, Trump failed to bring most of these promises to reality as his party divided on a number of major changes that he pushed for. Upcoming developments on the tax reform story will hold the key to investorsâ confidence in the president and, subsequently, the stability of the US dollar.
The greenback still managed to move higher against the British currency today as Prime Minister Theresa May struggled to maintain order within her Cabinet. International Development Secretary Priti Patel failed to disclose two secret meetings that she had with Israeli officials in September, despite supposedly having confessed all to May last Monday. The scandal ridiculed Mayâs efforts to impose discipline on her ministers.
EUR/USD traded at 1.1590 as of 11:35 GMT on Wednesday after rising to 1.1608 at 07:20 GMT, the pairâs highest level for the day. EUR/USD began trading today at 1.1594. GBP/USD was at 1.3105 after touching 1.3098 at 11:15 GMT, the pairâs weakest level in two days. GBP/USD started the day at 1.3171.
The Dollar Index, which tracks the performance of the US currency against a basket of its major peers, fell to 94.90 as of 11:30 GMT today from 94.91 yesterday.
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