GERMANY: Merz Placating States But Tax Cut Delays Possible
- Chancellor Merz has hinted a compromise will be met following state-level discontent around the "growth booster" tax package, which would otherwise incur expenditure gaps for the state and municipal level. Nevertheless, some delays for the programme may be possible if no compromise is met.
- As a reminder, the tax package includes the following (and are part of a broader "immediate program" for economic relief):
- a) Degressive (type of accelerated) depreciation of tax obligations for equipment investment ("Investitions-Booster"). 30% in year 1, then 30% of remaining value each following year, applies for 2025, 2026, and 2027
- b) Extra-fast depreciation of tax obligations for enterprise-held electric vehicles. 75% in year 1, followed by 10%, then 5%, 5%, 3%, and 2%.
- c) Reduction of corporation tax (Koerperschaftsteuer). Gradual decrease from 15% to 10% in five annual steps starting 2028.
- A federal-state working group will come up with a proposal leveraging sales tax redistribution or fixed amount transfers to ensure state and municipal-level compensation, Handelsblatt comments.
- If a compromise is not being met before at least passing in Bundesrat, which is planned for 11 July, the draft bill could end up in the Bundesrat's "mediation committee", which would at least slow its passing down. Handelsblatt has reported that Chancellor Merz is very keen to prevent this, according to state circles.
- Electricity surcharge cuts, which will have a negative impact on German CPI if implemented, appear not to be affected.
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Historical bullets
SILVER TECHS: Trading Above Support
- RES 4: $36.000 - Round number resistance
- RES 3: $34.903 - High Oct 23 ‘24 and the bull trigger
- RES 2: $34.590 - High Mar 28
- RES 1: $33.686 - High Apr 25
- PRICE: $32.174 @ 08:07 BST May 21
- SUP 1: $31.668/651 - Low May 1 / 15
- SUP 2: $30.915/28.351 - Low Apr 11 / 7 and the bear trigger
- SUP 3: $27.686 - Low Sep 6 ‘24
- SUP 4: $27.180 - Low Aug 14 ‘24
Silver continues to trade closer to its recent lows. A bullish theme remains intact and the latest pullback that started Apr 25, is likely a correction. Key short-term support has been defined at $31.668, the May 1 low (pierced). A clear break of this level would signal scope for a deeper retracement and open $30.915, Apr 11 low. For bulls, resistance to watch is $33.686, the Apr 25 high. Clearance of this level would confirm a resumption of the uptrend.
USDCAD TECHS: Bear Threat Remains Present
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4021 50-day EMA
- RES 1: 1.4016 High May 12 / 13
- PRICE: 1.3949 @ 08:02 BST May 20
- SUP 1: 1.3814/3751 Low May 8 / 6 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 ‘24
- SUP 4: 1.3643 Low Oct 9 ‘24
Despite the latest move higher, the trend condition in USDCAD remains bearish. Moving average studies are in a bear-mode position, highlighting a dominant downtrend. A resumption of weakness would open 1.3744, a Fibonacci retracement. Key resistance to watch 1.4024, the 50-day EMA. A clear break of this hurdle would signal a stronger reversal and open 1.4111, the Apr 4 high.
GILTS: Opening calls
Gilt calls, 91.48/91.63.
