Dollar gains with focus on Tax reform, Flynn drama

Politics in Washington continued to grip the attention of traders in financial markets, with the dollar rallying as investors assess the implications of developments for U.S. tax reform and the investigation into connections between Donald Trump’s campaign and Russian meddling in the U.S. election.

The greenback recovered some of Friday’s losses as investors unwound trades triggered by what turned out to be an erroneous ABC News report about Trump and former national security adviser Michael Flynn. The Senate has put Trump one step closer to passing tax reform by year-end. Australian bonds fell. Global equities are heading into year-end near all-time highs as investors focus on earnings and economic growth. Washington’s influence blew a chill through Wall Street Friday on news that Flynn has pleaded guilty to lying to the FBI and that he had agreed to cooperate with prosecutors. While the S&P 500 Index dropped as much as 1.6 percent, it ended the day down just 0.2 percent. Trump called on investors to sue ABC News after the false report.

Here’s a look at what’s ahead for markets in the coming days:

On Monday, Euro-area finance ministers discuss the future of the region, vote for a new president, and debate Greece’s bailout review in Brussels.

The European Commission College of Commissioners discusses Brexit on Wednesday and will likely make its recommendation on whether sufficient progress has been made to move negotiations onto the future relationship.

The U.S. faces a partial government shutdown after money runs out on Dec. 8 if Congress can’t agree on a spending bill by then.

U.S. employers probably hired at a robust pace in November as the unemployment rate held at an almost 17-year low. The Labor Department’s jobs report next Friday may also show a bump up in average hourly earnings.

Countries setting monetary policy this week include Australia, Brazil, Canada, India and Poland.

Source: Bloomberg Pro Terminal

Jr Trader Alexander Kumanov

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