The U.S. Dollar has returned to safe-haven status overnight as investors weigh the impact of political discord and wonder if progress in China trade talks could be impacted.
The uncertainty built around two headline events in a call for impeachment in the U.S. and demands on the other side of the Atlantic for the U.K. Prime Minister to resign overshadowed announcements pertaining to visits and guarantees between the U.S. and China’s negotiators. Oil price flows have also aided the buck as Saudi Arabia’s Aramco said it was ahead of schedule in stabilizing its supplies after recovering from the September drone attack.
Today we get some Home Sales figures at 10 AM, which could surprise if they contract as it happened last month. The more important final second-quarter revision of Gross Domestic Product growth will be released tomorrow at 8:30 AM. We shall monitor just how sensitive markets can be to political statements as we expect trade headlines to take second place. The biggest changer overnight, primarily affected by lower crude prices, is the Mexican Peso which has depreciated by 1.3% in the last week.
What to Watch Today…
- New Home Sales 10AM
Complete Economic Calendar can be found here.
The Euro-zone economy is looking rather weak and it has become a major concern that perhaps the bloc will fail to expand by the end of the year. German Purchasing Managers Index for manufacturing was described by many as simply awful. The anemic nature of this year’s economy can be felt everywhere since governments are starting to wonder if it is perhaps time to invest and spend after years of fiscal austerity.
The financial recovery was due to monetary policy that could ease toxicity in bond markets while also cut rates, but with limited monetary tools left, it is certain that governments need to lend a hand. Global demand and trade barriers are slowing down Germany, an economy dependent on healthy European and worldwide markets. As the strongest member nation, Germany is a worry when performing as the weakest link.
The Pound fell in value as investors wondered what will come next as a political crisis is brewing with many opposition leaders calling for Prime Minister Boris Johnson to quit as they deem his actions not only unlawful, per the U.K. Supreme Court decision, but also unworthy of staying in office. Snap elections could come, a second referendum on the Brexit question, a delay to the Brexit deadline, and further debate as Parliament participate on all items. There are plenty of dark clouds around London and with a drop in financing loans for housing revealed this morning, we see a very vulnerable Sterling in the next few days that could go either way.