Forex Blog: Currency Trading News & Analysis.

January 10th 2008

Potential Tax Cuts Boost USD

Recently, most of the news regarding the Dollar has, frankly, not been positive.  The housing crisis is beginning to take its toll on the broader economy.  The Fed is planning to lower interest rates at its next meeting, which will eliminate the positive differential with Euro-zone rates.  High commodity prices are driving inflation and eroding the value of the Dollar.  But today, the news was good- at least as far as the USD is concerned.  The Wall Street Journal leaked a document from the Bush Administration that mentioned tax cuts for households and businesses.  The aim of the tax cuts, ideology notwithstanding, is to provide a stimulus for the reeling economy.  As they say, what’s good for the US economy is good for the Dollar.  Reuters reports:

"Given the market’s perception that a (U.S.) recession is looking increasingly inevitable, tax cuts and any stimulus measures offered by the authorities will obviously bode well (for risk appetite) … It’s more positive for the dollar because there is a sense that it may help avoid a recession."

Read More: Prospect of US tax cuts boosts FX risk appetite

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Posted by Adam Kritzer | in Politics & Policy, US Dollar | No Comments »

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