Dollar sentiment improves as Trump proposes tax overhaul

President Trump and Republican leaders on September 27 presented proposal to cut the top corporate tax rate to 20% from 35%, cut taxes for small businesses and reduce the top income tax rate for individuals as part of an overhaul of the US tax code. This proposal lifted inflation expectations and drove the stock market rally as expected tax cuts is a fiscal stimulus which can boost US economy. Among positive economic data which supported US dollar last week were the upgrade of Q2 GDP final reading to 3.1% from 3.0% second estimate, durable goods orders 1.7% jump in August, the sharp increase in ISM manufacturing index from 58.8 in August to 60.8 in September, the highest reading since 2004 and auto sales jump in September. Investors reduced net short dollar position as improving data supported the case of a third rate hike this year in December. As is evident from the Sentiment table, sentiment improved for British Pound and euro. The euro, Canadian and Australian dollars and Pound remain the four major currencies held net long against the US dollar.