Tax-reform comes to a pinnacle this week after Republicans unveiled their compromise on Friday. We discussed on the Morning Express Friday; now that the deal is within reach, headline holdups are merely a ceremonial bargaining chip. Senator Marco Rubio held out in favor of expanding the child tax credit but reaffirmed his support on Friday. The bill, which leans closer to what came out of the Senate, is set to be voted on by the House on Tuesday. The timing of the vote in the Senate is a little less certain due to health issues with Senators John McCain and Thad Cochran. Senate Republicans also have a paper-thin margin of error, they can only lose two votes. Regardless, we expect this bill to move to President Trump’s desk by the end of the week. The S&P settled Friday’s session at 2682, a new all-time high, signaling the next bull leg higher to our yearend target of 2715. Tax-reform moving swiftly this week will be a key catalyst in this target getting achieved by Friday.

2. Bitcoin $20k and CME Launch

Bitcoin’s historic run continues as the $20,000 milestone is tested upon the launch of the CME’s futures product. There is no question that the launch of Bitcoin derivatives has further catapulted prices higher and the CME’s product will require a hefty margin. The contract size is five Bitcoins, so at $20,000 the value of the contract is $100,000. The size of the contract is actually smaller than the likes of Gold whose value is about $126,000. However, as we all know, the volatility and thus uncertainty is much greater. For Bitcoin, the initial margin is currently set at 47.3% of the value of Bitcoin which equates to $47,300 with the price at $20,000. There is also the CBOE futures product which is one Bitcoin. The margin here is 44% of the value of Bitcoin.

3. Eurozone Inflation and Wages

Lagging inflation has kept monetary policy around the world loose. A key read on Eurozone CPI is due out tomorrow morning at 4:00 am CT. The Euro sold off last Thursday after the ECB released economic projections through 2020. Though they revised their growth forecast higher, inflation was still not expected to reach their 2% by then and this put pressure on the currency. We remain long term bullish the Euro as we believe their data has begun to gain tremendous traction. Tomorrow morning’s read will go a long way in confirming our thesis. Price action in the March Euro is approaching major three-star support at 1.1797-1.1799. The other half of the central bank argument, though to a lesser degree, is wage growth. Tuesday morning brings a read on Eurozone wages at 4:00 am CT. German Business Sentiment is also a key read and due out an hour prior.

4. Bank of Japan

The BoJ holds a policy meeting late Wednesday night and into the early hours of Thursday morning (CT). The Yen began to work higher last week on a weaker Dollar following the Fed meeting. However, the Yen has been under pressure recently due to comments earlier in the month from BoJ Governor Kuroda that he expects no immediate need to raise the bank’s yield targets. Prior to his comments though we began to hear BoJ council members speak up in contrast and that there is a potential for diminishing returns by keeping policy so loose with no end in sight. We remain long-term bullish the Yen and these points of ‘contrast’ are what we will be watching for.

5. U.S Data culminates into Friday

U.S data trickles out through the week. Beginning with Building Permits and Housing Starts on Tuesday. Also on Tuesday is a speech by Fed dissenter Neel Kashkari. Wednesday is Existing Home Sales and Thursday brings the final read on Q3 GDP (the preliminaries bring more anticipation) along with Philly Fed Manufacturing. However, it is Friday that we are really eyeing with Durable Goods and a key read on inflation coming from the PCE Index. Also Friday is Personal Spending and Income data along with Michigan Consumer Sentiment. Lagging inflation has cooled the Fed and even garnered a second dissenter on hiking rates for the first time this year. Friday can go a long way in sparking the next leg lower in the U.S Dollar.