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Credit Agricole: New rules to limit US corporate tax inversions boost USD - eFXnews

FXStreet (Łódź) - The eFXnews team remark that according to Credit Agricole USD's recent strength is partly due to the new US regulations aimed at limiting corporate tax inversions announced on Monday by Treasury Secretary Jack Lew.

Key quotes

"The inversions law announced this week aims to prevent US companies from relocating abroad to lower their tax liabilities (the US for instance has the highest corporate tax rate in the developed world at 35%, even though after deductions and other loopholes net tax payments are much lower)."

"The announcement this week reflects a departure from that thinking but more important it also has forex market implications."

"The introduction of the law drove in part some of the recent USD strength, especially against European currencies."

"The law does not impact 'completed' deals but it will impact the possible outflow from 'pending' deals, which are close to USD150bln."

"While some firms will complete the deal given the costs to cancel, we think the law will lead to less cross-border M&A outflows over time."

"The result is higher net FDI flows and a more supportive USD backdrop, especially against GBP, SEK and CHF."

'This content has been provided under specific arrangement with eFXnews.'

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