Today's news headlines:
- ‘Supreme court rules against Johnson on Parliament’s suspension’. Boris Johnson faces pressure to resign following the Supreme Court’s ruling of an unlawful suspension of Parliament. Johnson has stated he remains optimistic a Brexit deal can still be agreed before the 31st October deadline, although significant barriers remain. With MPs returning today, Jacob Rees-Mogg will speak for the government at 11:30am, and Boris Johnson is also expected to make a statement. (Financial Times)
- ‘Pelosi launches formal Trump impeachment inquiry over Ukraine’. Speaker of the House of Representatives, Nancy Pelosi, has announced the House is opening a formal impeachment inquiry of Donald Trump. In recent days, multiple Democrats have called for action following news that President Trump pushed Ukraine to investigate Joe Biden, the front-runner for the Democratic party in the 2020 elections. (Bloomberg)
We keep waiting for the negative tone in the headlines to dissipate, but markets just keep receiving fresh provocation, further entrenching the risk-off market stance. When the UK Supreme Court ruled that Boris Johnson’s prorogation of Parliament was unlawful, we had anticipated a fresh Sterling rally, in keeping with previous upsets to the PM’s path towards a no-deal Brexit. Instead, there was a mere nudge higher, but even that wasn’t sustained for long.
The dour mood that started with yesterday’s poor EU data releases was only extended by Donald Trump’s combative UN address, which included fresh criticism of China just days before a scheduled meeting to progress trade talks. While this language prompted a fresh response from China, stating talks could not progress under threat, the rhetoric belies realities of the situation. China has indicated that it will purchase additional pork, in addition to previous commitments on agricultural imports. Moreover, the measured Chinese reaction to these comments suggests they set them aside—as rhetoric for domestic consumption leading into the Presidential Election—and continued to operate under the previous premise of detente. Under that scenario, US-China trade progress is still on track, and a resumption of a more upbeat tone is quite probable.
Bottom line: Aside from a few more Federal Reserve central bankers speaking today and tomorrow, the data calendar is pretty bare until Friday afternoon, when US Durable Goods Orders and Personal Spending data enter the spotlight. News headlines will continue to drive the market tone until a more substantive rationale enters the frame.
Sterling sellers dominate in London’s open as the UK’s political crisis will be addressed today when MPs return to Parliament. The trade-weighted Sterling Index is likely to be supported by the 100-daily moving average, while Cable has immediate support at the 1.24 level. In today’s session, the pair is expected to be driven primarily by UK politics.
With the Euro experiencing low levels of volatility recently, Sterling will likely remain in the driving seat for the pair which has found support at the 1.13 figure in recent sessions. With little in the way of economic data for today, news regarding the UK’s political crisis could be the main contributor to intraday volatility.
A quiet economic data calendar means EUR/USD is unlikely to break out of September’s 1.09 – 1.11 trading range today. Yesterday’s gains have diminished overnight, bringing the pair back to the 1.1000 level. The US Dollar Index remains near year-to-date highs, while the Euro Index trades close to year-to-date lows.
All content is written by the Global Reach Trading Desk. The opinions expressed are not the view of Global Reach Group and are not intended as investment advice.