Trumps win and tax breaks - Nomura

Analysts at Nomura explained that Donald Trump’s election as President and the Republican control of Congress have raised the likelihood that a tax break on the repatriation of foreign earnings could be enacted.

Key Quotes:

"We believe that the repatriation flow from such a policy could be about $500bn.

However, what matters for FX markets is how much is actually held in foreign currency and which cross will be the most affected.

Our estimates suggest that most of the potential flows would go through EUR/USD, GBP/USD and USD/CAD, but that the actual FX flow could be relatively small and may have only a marginal impact on FX.

The election of Donald Trump as US President and the Republicans having control of both the Senate and the House of Representatives has increased the likelihood of tax reforms in the US. One piece of potential legislation that is attracting a lot of attention from FX investors is the possibility of a tax-holiday on the repatriation of foreign earnings by US firms.

This was one of Donald Trump’s campaign proposals: a one-off 10% tax rate on repatriated earnings."