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Biden’s tax plan in focus, potentially bringing tax hikes on corporates and capital gains; UK retail sales beat forecasts, delivering strength to GBPUSD

Daily News April 26, 2021 at 02:02 am (GMT)

• Biden’s tax plan in focus regarding potential tax hikes
• GBPUSD regains some ground as UK retail sales beat forecast
• Bitcoin dropped below $51,000 on Saturday and still on the way to recover

USD continues to trade low, with the DXY index closed at 90.83 last Friday, down about 0.50%. A key catalyst driving USD lower has been persistently dovish stance from the Fed. By downplaying the inflation threats and keeping the door open to longer-term accommodative policies, Jerome Powell’s comments often outweigh macro data such as CPI and retails sales which have been outperforming forecasts. On the fiscal side, Biden announced a tax hike for earners over $1 million, arousing some risk aversion in the market. More details will come out this week, included in the “American Families Plan”. Biden is also expected to deliver a corporate tax hike, reversing Trump’s tax cuts in 2017. This could help rein in some inflation threats, taking some pressure off the Fed to normalize monetary policy. All eyes are turning to the April Fed’s meeting on Wednesday, with Q1 GDP also due Friday.

A stronger-than-expected release on UK retail sales has pushed GBP higher against USD last Friday, closing at 1.3879, 0.27% higher. Sales surged 7.2% in March and the overall PMI rose from 56.4 to 60.0 in April. Being above 50 shows that the economy is growing. Among all the industries, service sector rose from 56.3 to 60.1 and manufacturing was up from 56.6 to 59.1. However, the boost was limited due to the fact that retail sales still saw a decline over the first quarter.

Bitcoin dropped 1.77% to $50,269.9 on Saturday, losing $906.75 from the previous close and currently still remains below $51,000 at press time. Compared with the YTD high at $64,895.22, it has down about 22.5%. The drop was primarily due to the fear on Friday that Biden’s plan to raise taxes on capital gains will curb investment in digital assets, but some traders and analysts believe that declines are likely to be temporary.