The Trump impeachment is finding new legs after a military source confirmed the transcript of the President's call with the Ukrainian President was missing crucial information; yet, it doesn’t matter. The US House has voted to sanction Turkey for the recent invasion of northern Syria; again, it doesn’t seem to matter. The market appears at ease despite the latest twists in these key themes. Perhaps it’s the passage of the UK general election on December 12th. Can that be it? Surely no one is under the illusion an election will be the magic bullet. Perhaps US earnings season—which outperformed its trade-war depressed estimates—is the cause of this equanimity; maybe. There has been little economic data of note since last week, so perhaps it’s just the patient wait for the Federal Reserve press conference this evening.
Bottom line: There is a stillness to markets in today's open and lack of reaction to negative headlines. This suggests the worst is priced in already and markets are waiting to pounce on positive stimuli. A slightly dovish Fed would support markets better—implying lower rates—but secretly we’re hoping policymakers project confident tone about the environment, despite the administration’s criticisms.
Cable hit resistance at the 1.29 level in yesterday’s trading as well as in the London open this morning, indicating a sustained Sterling climb is unlikely in the short-run. With a December general election now in the diary, Brexit uncertainty is heightened so the pair may be stuck in a tight range in the short-term. GBP/USD may find support at the 1.2715 200-daily moving average.
The currency cross continues its 60-pip trading range this morning, hitting resistance at the 1.16 level on the London open. With short-term Sterling volatility now expected to fall following news of a December general election in the UK, the pair could continue to trade in a tight range.
Yesterday, the common currency broke out of its recent downward channel climbing above 1.11 and achieving a closing price above the key level. With a focus on the Federal Reserve this evening, the pair may trade flat in London’s session as investors await the Fed’s monetary policy announcement.