US: Big isn't always beautiful – Commerzbank

However, when the markets reopen on Monday after today's Independence Day in the US, the labour market is likely to be long forgotten. Last night, Donald Trump scored another victory: Congress finally approved his Big Beautiful Bill, which he is expected to sign today. The law maintains tax cuts that were supposed to expire and introduces new ones (e.g. on tips and overtime), Commerzbank's FX analyst Volkmar Baur notes.

US's new borrowing is set to remain high

"The US Dollar (USD) may therefore benefit from the passage of the law in the short term. Ultimately, it should provide a fiscal stimulus to growth, which should support the currency. In the long term, however, the bill only adds to our concerns about the status of the US dollar. Although the bill does include tax incentives for investment, which is positive, investment incentives for future technologies are being cut elsewhere. "

"In addition, the bill plans massive cuts in the healthcare sector, which could cause an estimated 12 million people to lose their health insurance. Higher spending on deportations will also contribute to a decline in the labour supply in the US, further limiting the country's growth potential. The government expects the economy to grow around 1 percentage point faster per year due to the bill. However, such assumptions are made in almost all such laws and rarely become reality."

"The US's new borrowing will therefore remain high. It currently stands at around 6.5% of the country's economic output, even though we are in a growth phase. The law will ensure that this does not improve even in good times. This means that there is simply no longer any buffer for a possible crisis."