US dollar brushes aside Trump impeachment calls

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26 September 2019


Foreign exchange traders brushed aside concerns regarding a formal impeachment inquiry into President Donald Trump on Wednesday, instead piling into the US dollar and sending it to its strongest position in over two weeks.

he aforementioned impeachment hearings surround a controversial phone call between Trump and the Ukrainian President. Investors did, however, greet the transcript of the telephone conversation released by the White House positively, given that it showed no evidence that would lead to a criminal enquiry. The reaction in the US dollar, and indeed US treasury yields, suggests that the market views the impeachment attempt as highly likely to fail.

The greenback did, however, lose some ground against some of the more riskier currencies yesterday following some rather upbeat comments regarding the US-China trade war. Trump told reporters in New York that the two economic superpowers were having ‘good conversations’ and that an agreement ‘could happen sooner than you think’. We have long contested that recent US protectionism has largely been a negotiating tactic and see these comments as merely further evidence to support this view.

Updated second quarter US growth data is set for release this afternoon. The market is not expecting any meaningful revisions so volatility in the EUR/USD pair is likely to be driven largely by politics and a speech from ECB President Mario Draghi. Draghi is set to appear at the ESRB annual conference in Frankfurt this afternoon, although with the most recent ECB meeting occuring not two weeks ago, we’re not likely to see any significant new information.

Sterling tumbles as Brexit mess drags on

The toing and froing witnessed in the pound in recent weeks continued once again on Thursday, with the UK currency plunging almost one percent versus the dollar during the London trading session.

While much of the above move can of course be attributed to US dollar strength, the Brexit risk premium attached to sterling can also be to blame. While the Supreme Court ruling earlier in the week raised optimism that a ‘no deal’ Brexit could be avoided, it has not really changed too much in terms of what’s next. Boris Johnson remains as Prime Minister, despite misplaced suggestions that he could quit, with no clear alternative on how to progress.

It looks increasingly likely day-by-day that another extension to Brexit will be required before we see a general election called. While Labour leader Corbyn would undoubtedly welcome an election, he would not support one until after a delay beyond 31st October.