USD: Discussion on corporate tax in focus – ING

Trump’s second day in office was dominated by the threat to overhaul tax systems for multinational companies. As part of a memo originally released on Monday, the president is tasking the US Treasury with investigating discriminatory taxes on US citizens or corporations, notes ING FX analyst Francesco Pesole.

New layers of uncertainty for markets to contemplate

“Along with the raised possibility of withdrawing from the OECD agreement on a minimum corporate tax, the US is considering double taxation on some foreign individuals and companies established in the US. It is difficult to draw conclusions about how tangible this threat is. , or the implications for U.S. and foreign corporations for now. It’s likely another layer of uncertainty that markets are getting used to.”

“On the hot topic of tariffs, the focus has remained on Canada and Mexico after Monday’s threat to impose 25% tariffs. After another round of dollar weakness in yesterday’s US session, CAD and MXN are now trading about 1% stronger compared to Friday We read that as a sign that markets are still reluctant to price in the full magnitude of the impact of the tariffs, and perhaps still are. “They are holding on to the hope that tariffs will be further delayed due to some cooperation on migration. Downside risks to CAD and MXN remain elevated.”

“Today’s US calendar only includes the Leading Index and MBA mortgage applications, which in the week ending January 10 (released last week) jumped 33%, the highest level since March 2020. We will see if markets have the will to push 10-year Treasury yields back to 4.50%, which may add to the soft dollar momentum. Our rates team remains bearish on UST more. beyond the very short term, and that fits with our view that the dollar can withstand temporary positioning squeezes.”