Mnuchin: Tax Reform Derailed by Health Care Failure

A woman walks past electronic boards showing stock prices outside a brokerage in Tokyo

A woman walks past electronic boards showing stock prices outside a brokerage in Tokyo Japan

"It is fair to say it is probably delayed a bit because of the healthcare", Mnuchin told the newspaper.

A variation on the Value-added-tax that is common in Europe, the border tax has become increasingly controversial among congressional Republicans.

The dollar gained overnight against the yen on comments by U.S. Treasury Secretary Steven Mnuchin that were seen favouring long-term dollar strength.

Critics of the Trump administration have called for the president to release his own tax returns before signing any tax reform into law.

In a note on Wednesday, Alec Phillips of Goldman Sachs said he didn't believe border adjustment would be part of a tax package. He, however, insisted that tax reforms would be done before the end of 2017. "We need to junk our current tax code for one more suited to the modern economy".

Mnuchin also acknowledged that one of the key elements in a tax overhaul plan being developed in the House of Representatives, a border-adjustable tax on imports that would give preferential treatment to exporters and to retailers and manufacturers who source goods and raw materials within the United States, is facing resistance from within the administration.

While the EURUSD has fluctuated overnight, Mnuchin's repeat comment has had an impact on the USDJPY, which has levitated sharply in the overnight session, rising just shy of 109 and lifting both European stocks and USA equity futures with it.

"We still think the dollar is going to strengthen over time based on the outlook for USA monetary policy. but for now, with markets not heavily focussed on monetary policy, it could explain this consolidation (for the greenback)", said Eric Viloria, currency strategist at Wells Fargo.

"The president's comments during the campaign reflected previous periods of time", he added. Mr. Trump has insisted that negotiations are still going on.

The treasury secretary also announced that more sanctions would be imposed on Syria and North Korea, further defending Trump's U-turn in regard to calling China not a currency manipulator as he had promised to do so.

Barring a major shock in the China readings, markets are expected to remain focused on US data and its possible impact on the pace of interest rate hikes, and concerns over North Korea and the French presidential election. Focus will also be on the US - Japan dialogue.

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