TARIFFS: Senate Passes Symbolic Resolution Terminating Trump's Global Tariffs
The US Senate has passed a resolution terminating the national emergency declaration that US President Donald Trump used to impose reciprocal tariffs on trading partners. The resolution will go no further as House Speaker Mike Johnson (R-LA) established a new rule preventing such legislation from reaching the House floor. If the resolution were to pass the House, it would be subject to a presidential veto.
- The vote shows - for a second time this week after a similar vote to nix Brazil tariffs - that there is a workable anti-Trump majority in the Senate, which could become a factor in future legislation. Senators Susan Collins (R-ME), Rand Paul (R-KY), Lisa Murkowski (R-AK), and Mitch McConnell (R-KY) all voted with Democrats in favour.
- Paul told reporters ahead of the vote, “Emergencies are like war, famine, tornado. Not liking someone’s tariffs is not an emergency. It’s an abuse of the emergency power. And it’s Congress abdicating their traditional role in taxes.”
- Notably, the votes also show some Republican scepticism on Trump's tariff agenda ahead of the Supreme Court's ruling on the legality of Trump's emergency declaration. Following a series of lower court rulings against the Trump administration, SCOTUS will hear aguments at a November 5 hearing, with a final ruling expected next year.
- Prediction markets assess a slightly higher than 50% chance that Trump will lose the case. Should he lose, more than half of the roughly USD$160 billion in collected in tariff revenue would be at risk of refund, per Bloomberg.
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GBPUSD TECHS: Remains Remain Intact
- RES 4: 1.3789 High Jul 1 and key resistance
- RES 3: .3661/3726 High Sep 18 / 17
- RES 2: 1.3537 High Sep 23 1
- RES 1: 1.3482 50-day EMA
- PRICE: 1.3443 @ 16:28 BST Sep 30
- SUP 1: 1.3324 Low Sep 25
- SUP 2: 1.3282 Low Aug 6
- SUP 3: 1.3254 Low Aug 4
- SUP 4: 1.3144 38.2% retracement of the Jan 13 - Jul 1 bull cycle
The bear cycle in GBPUSD that started Sep 17, remains in play. Recent weakness resulted in a break of 1.3491, a trendline support drawn from the Aug 1 low. This undermines a recent bullish theme. Note too that 1.3333, the Sep 3 low and a key support, has been pierced, opening 1.3282 next, the Aug 6 low. Initial key resistance to watch is 1.3537, the Sep 23 high. A break of this hurdle would signal a reversal.
US: CBO: 750k Set To Be Furloughed In Shutdown, Econ Impact Depends On Duration
The Congressional Budget Office releases a short report on the potential impact of a full government shutdown in response to a request by Senator Ernst, here.
- The analysis is based largely on the impact report published after the partial shutdown in Dec 2018-Jan 2019. The key findings are that around 750,000 federal employees could be furloughed (around the generally accepted consensus of 800,000), and that the economic impact - while dependent on the details - could see a short-term negative impact reverse when payments were restarted.
- On the scope of the "CBO estimates that under a lapse in discretionary funding for fiscal year 2026 about 750,000 employees could be furloughed each day; the total daily cost of their compensation would be roughly $400 million." The CBO does not make this explicit but the impact could be more acute if the Trump administration follows through with its threat to fire many workers instead of furloughing them. (It says "the Administration has indicated that it might subject some employees, who might otherwise be furloughed, to a reduction in force."
- On the economic impact: "The effects of a government shutdown on the economy would depend on its extent and duration. For example, CBO reported that the five- week partial shutdown ending in January 2019 delayed discretionary spending for compensation and for purchases of goods and services and suspended some federal services. Once the government reopened, most of the payments were made. At the time, CBO estimated that although most of the real gross domestic product (GDP; real GDP is adjusted to remove the effects of inflation) that was lost during the fourth quarter of 2018 and the first quarter of 2019 eventually would be recovered, about $3 billion would never be. In its report, CBO projected that amount at 0.02 percent of annual GDP in 2019." Most analyst estimates of the GDP impact are around 0.1-0.2pp (annualized) per week of shutdown.
- Most of the other impacts - including "delayed procurements and lapsed contracts during a shutdown" are more difficult to determine, but unsurprisingly "In general, a longer lapse will have larger effects than a shorter one will."
EURUSD TECHS: Monitoring Support
- RES 4: 1.2063 2.236 proj of the Feb 28 - Mar 18 - 247 price swing
- RES 3: 1.2000 Round number resistance
- RES 2: 1.1919/23 High Sep 17 / 2.0 proj of Feb 28 - Mar 18-27 swing
- RES 1: 1.1755/1820 High Sep 29 / 23
- PRICE: 1.1730 @ 16:26 BST Sep 29
- SUP 1: 1.1646 Low Sep 25
- SUP 2: 1.1574 Low Aug 27
- SUP 3: 1.1528 Low Aug 5
- SUP 4: 1.1392 Low Aug 1 and bear trigger.
The trend theme in EURUSD remains bullish and the recent pullback appears corrective. Attention is on support at 1.1682. the 50-day EMA. It has been pierced, a clear break of this average would signal scope for a deeper retracement and expose 1.1574 initially, the Aug 27 low. For bulls, a clear resumption of gains would refocus attention on 1.1923, a Fibonacci projection. Initial firm resistance to watch is 1.1820, the Sep 23 high.
