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Global equities ended mostly firmer last week, after the US Senate approved the most awaited US tax reform bill. UK markets ended the week on a positive footing, amid gains in commodity-related sector stocks. In major news, the International Monetary Fund downgraded UK’s growth forecast to 1.6% from 1.7% in 2017 and to 1.5% in 2018. On the data front, UK’s gross domestic product (GDP) expanded more-than-expected on an annual basis in the third quarter of 2017. However, public sector net borrowing posted a deficit in November, less than market anticipations. European markets ended the week in red, amid political uncertainty in Spain. On the macro front, Eurozone’s current account surplus narrowed in October, compared to its prior reading. Furthermore, construction output retreated on a monthly basis in the same month. Adding to the negative sentiment, Germany’s Ifo business climate index fell more-than-expected in December. Furthermore, the Ifo expectations index plunged higher than market forecast in the same month. US markets ended the week in positive territory, following the approval of the US tax bill. On the macroeconomic front, the US existing home sales surged to its strongest level in 11 years on a monthly basis in November. Additionally, the US NAHB housing market index soared to its highest level since July 1999 in December. Asian markets closed mostly stronger last week, tracking gains on Wall Street. In major news, the Bank of Japan held its benchmark interest rate steady at -0.10% and its target for 10-year Japanese government bond yields at around 0.0%.

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Currency Update

The EUR ended higher against the USD, after Eurozone’s consumer confidence advanced more-than-anticipated in December. However, the final consumer price index (CPI) recorded an unchanged reading on an annual basis in November. Additionally, Germany’s GfK consumer confidence recorded an unexpected rise in January. The British Pound ended weaker against the greenback, after UK’s GfK consumer confidence unexpectedly declined in December, marking its weakest level since December 2013. In contrast, the current account deficit narrowed less-than-expected in 3Q17. The US Dollar ended lower against its key counterparts last week, after the US GDP was revised down for the third quarter of 2017. Further, the initial jobless claims increased more-than-expected during the week ended 16 December 2017. Moreover, the Chicago Fed National activity index fell more-than-expected in November.

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The US Senate approved the $1.5 trillion tax bill…

United States Senate Republicans approved a sweeping overhaul of the US tax code in more than 30 years, further sending it to the US President, Donald Trump, for signature. The Senate approved the $1.5 trillion tax bill, which includes permanent tax breaks for corporations and temporary tax cuts for individuals, by a final vote of 51-48. Further, Republicans stated that the tax cuts for corporations, small businesses and individuals will boost US economic growth.

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The Week Ahead

Going ahead this week, investors will keep a tab on the European Central Bank’s economic bulletin along with the US consumer confidence, advance goods trade balance along with German CPI for further cues.

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