Intraday Market Thoughts

Will Impeachment be Prorogued?

by Adam Button
Sep 25, 2019 13:26

Never mind the title -- It was just a silly wordplay. US House Democrats will start impeachment proceedings against the President in a move that's unlikely to be successful but could deepen political wounds. NZD is now paring earlier gains, which were initially triggered by the RBNZ statement coming less dovish than expected. A heavy dose of Fedspeak Wednesday should be closely watched (more below). GBP gives up all of the post-Supreme Court decision gains as Boris Johnson returns to Parliament, vowing to keep Brexit on time. The latest stocks selloff means that all of our 3 Premium Insights trades are well in the green, yielding more than 500 pts in the green. The rationale and implications behind and of those trades is laid out in the members video below.

Trump tried to head off impeachment proceedings by authorizing the release of the transcript of a call with Ukraine's President but it wasn't enough. House leader Pelosi announced the formal inquiry late Tuesday after markets earlier moved on rumors it was coming.

The House of Representatives needs a two-thirds majority to impeach and that's a longshot-at-best with Democrats holding a narrow majority. However Pelosi hinted at a wide-ranging inquiry will delve deeper into Trump's finances and affairs.

The market reaction was risk aversion mixed with broad US dollar selling. Even the Canadian dollar managed to gain versus USD despite a 3% drop in oil. One of the side effects of impeachment proceedings is that they will delay ratification of the new NAFTA trade deal.

While the impeachment news pushed risk trades over the edge, they were wounded earlier in the day by three other news items. 1) The Sept Richmond Fed fell to -9 vs +1 expected. 2) The Conference Board consumer confidence index slumped to 125.1 from 133.0, including a sharp drop in the 'expectations' component. 3) Trump took a hard line on China at the UN.

Central bank focus is currently pushed to the sidelines as markets focus on politics, but it will be economic considerations that ultimately win out.

Looking at Wednesday's US calendar, August new home sales are due but it's the Fed speeches that could matter -- from George, Brainard and Evans. The latter two are the ones to watch. They're doves but we will be watching closely for signs on whether they're supporting a cut in October or waiting until December.

Act Exp Prev GMT
FOMC's George Speaks
Sep 25 14:00
CB Consumer Confidence
125.1 134.1 134.2 Sep 24 14:00

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