US Tax Reform, Brexit, and Bitcoin to Dominate into Year End

Politics to carry the markets

The end of the year is likely to be dominated by political stories, with central banks not looking to rock the boat and a Federal Reserve rate hike next week all but priced in. Any shocks could shake things up in the markets but it this is unlikely at this stage. A number of central banks have already made their move – ECB extended QE to next September, Bank of England raised interest rates, Bank of Canada raised rates twice – and has signaled an intention to wait and see before making any other changes.

US Tax Reform and Brexit to Dominate into Year End

The political picture has become more interesting, with Donald Trump’s pledge on tax reform making progress in Congress. There is some optimism that a plan that could pass in the House and the Senate could be agreed by the end of the year, although time is running out. As ever, there are other political distractions when it comes to Trump – North Korea, Russian links investigation and now Jerusalem – but as it stands these are having minimal impacts on the market, although each has the potential to should they take a negative turn.

Over the next week, Brexit negotiations are likely to have an impact on the UK market, as the two sides struggle to find a solution on the Irish border that appeases all involved. The EU has stated that this is one of the three issues that must be resolved before talks progress to trade and transition arrangements but with the self-imposed deadline fast approaching for this to be wrapped up this year, it’s going to be very tight.

The pound is under pressure again today and is on course for a fifth consecutive daily decline against the dollar. It previously hit two-month highs on the hope that the UK and EU were close to a deal on phase one, but most of these gains have since been given up and we’re now closing back in on 1.3350, a level that had previously been a ceiling for the pair.

To make matters worse, the grumblings within Theresa May’s own government are once again getting louder and there are increasing suggestions that she could be on borrowed time. It’s difficult to see how this could be a positive move for negotiations and therefore a deal being reached in time, something the EU is very aware of and may work in her favor, but also another thing the pound is likely to be vulnerable to.

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Bitcoin Passes $16,000 Only a Week After Hitting $10,000 For the First Time

Bitcoin is on the rise once again on Thursday and passed $16,000 only 8 days after reaching $10,000 for the first time. Bitcoin is now up more than 25% since yesterday morning, a phenomenal climb that continues to baffle most watchers. Prior to hitting $10,000, Bitcoin had been on a remarkable run, rising more than 900% since the start of January, the kind of move that many may never see again. And yet this pales in comparison to what we’ve seen since then and the last two days has been extraordinary.

The cryptocurrency has undoubtedly come on leaps and bounds this year but it’s difficult to see anything move as Bitcoin has and not fear a devastating bubble bursting. I don’t think it’s a coincidence that Bitcoin has been making headlines over the last week or so, during which time it’s risen another $6,000, or 60%. If speculation is playing as big a role in the latest moves as some expect, then very interesting times may lie ahead. Although as is always the case, this could rise a lot more before the bubble bursts. It will be interesting to see what happens once Bitcoin futures are launched on CBOE and CME and traders are given the chance to short, should they be brave enough.