Trump impeached: Why the lack of dollar reaction?

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19 December 2019


The FX market took the Trump impeachment news in its stride this morning, with the dollar little changed against its major peers.

or only the third time in history, a US President was impeached by the House of Representatives, with the two charges being abuse of power and obstructing Congress. The lack of reaction in the currency markets is primarily down to two factors. Firstly, the impeachment vote was overwhelmingly expected to pass, given that the House is currently controlled by Trump’s opposition, the Democrats. A trial will now take place in the Senate in the New Year, which is controlled by the President’s Republicans. A two-third majority vote is required here in order to actually remove Trump from office, an outcome that looks next to impossible at this stage.

Given the very high likelihood that Trump will remain in office until at least November’s election, EUR/USD has spent the past 24 hours fairly rangebound. Economic data out yesterday also didn’t rock the boat. Euro Area inflation remained unrevised at a lowly 1% in November, well short of the ECB’s target.

There also wasn’t any major pieces of data out of the US on Wednesday, with today likely to be no different. We instead look to tomorrow’s revised Q3 growth numbers.

What to expect from today’s BoE meeting

Sterling has remained around the 1.31 level versus the dollar in the past couple of sessions, weighed down by concerns regarding the length of the UK’s transition period with the EU.

Investors will now be bracing for this afternoon’s Bank of England meeting, the first since the Tories resounding victory at the general election. While governor Carney will not be delivering a press conference today, we will be receiving the central bank’s meeting minutes. We expect the minutes to strike a more optimistic note than we have seen in recent months, stressing the reduced Brexit risk in the near-term.

The issue for the BoE does, however, lie with UK economic data, much of which is below the levels that they would desire. Inflation is below target (coming in at 1.5% in November), earnings growth is slowing and growth is barely pottering along in positive territory. This, combined with the fact that a cliff-edge exit from the EU could be back on the table by the end of 2020, may cause policymakers to allude to the possibility of easing at some point next year.

The BoE’s rate decision and minutes will be released at midday UK time today. Retail sales at 9.30 GMT will also be worth watching.