Donald and the Giant Impeachment

You didn’t need an arcane regression analysis to see that democracy had a statistically significant relationship to volatility overnight. Democratic House Speaker Nancy Pelosi announced an impeachment enquiry into President Trump, torpedoing Wall Street stocks and the U.S. dollar.

The President himself, exercised his democratic right to free speech, suggesting that no trade deal with China was better than a bad deal and which in turn, sent crude oil markets tumbling. Although the impeachment headlines have portrayed the President as a Roald Dahl-Esque baddie, his comments via-a-vis China’s trade practices remain valid. Free trade aficionados and Trumpa-nistas should be careful what they wish for though. If an impeachment enquiry looks like ending his re-election chances in 2020, he may throw caution to the wind and harden his attitude to a China trade deal, increasing the chances of a global recession next year.

Democracy of another kind, in the form of corporate governance, was apparent as Adam Neumann, the CEO of WeWork, was told to take a WeWalk by investors after the failed IPO. The fact that WeWork owns a Gulfstream 650 private jet was a massive warning to me we were near “peak-Unicorn.” Last nights decision makes this more so. The bar for loss-making Unicorns, with scorched-earth market share business models and asymmetric voting rights, will be much harder to foist on public markets going forward. Welcome to reality chaps.

The U.K. Prime Minister Boris Johnson also felt the chill winds of democracy and an independent judiciary as the U.K. Supreme Court judged his suspending of Parliament unlawful. The ensuing British Pound rally was a bit underwhelming. It probably reflected the uncertainty of both Mr Johnsons tenure and the Brexit process with October the 31st looming.

My best guess from here, as Mr Johnson returns sheepishly to London today, is that Brexit is extended on the proviso that a general election and or a second referendum is held. Other conspiracy theorists (and I am one), would suggest that Larry the Cat, the official mouser of No.10 Downing Street, has enacted his revenge for Mr Johnson bring a Jack Russel dog into the official residence.

The morning’s highlight in Asia-Pacific will be the Reserve Bank ofNew Zealand (RBNZ) rate decision at 1000 SGT. The RBNZ is likely to leave rates unchanged at its record low of 1.0% with any move lower a huge surprise and see the NZD much lower. The RBNZ’s economic outlook will be of much more interest, as the street is pencilling more cuts in the months ahead.

As I wrote on Monday, a lack of tier one data makes this week one where markets tend to headline chase back and forth daily. The end result is usually much intra-day volatility, with weekly closes roughly where they started the week followed by head-scratching and mutterings of “what just happened?” I’m pleased to say it is all going to plan so far.


The impeachment hearing announcement delivered a knock-out blow to stocks markets already weak at the knees, with all three major indices cratered. The S&P 500 fell 0.84%, the tech-heavy Nasdaq fell 1.46%, and the Dow Jones slid 0.53%. Treasury yields fell as investors dumped stocks and moved into the relative safety of bonds.

In early Asia, both the Nikkei and ASX are both lower by around 0.75%, and I would expect the rest of Asia to follow a similar path as it opens over the next hour. With the data calendar so light today, headline-driven soundbites will rule the roost and investors may find watching from the sidelines a better strategy than getting whipsawed on intra-day volatility.


The Swiss Franc (CHF) and Japanese Yen (JPY) were the primary beneficiaries of the flight to safety overnight following the Trump trade comments and impeachment enquiry. The USD/CHF fell 0.42% to 0.9860, and the USD/JPY fell 0.43% to 107.10 while the AUD and NZD made similar gains against the greenback.

In the NZD’s case, the rally has shaky foundations ahead of the RBNZ rate decision today. Both AUD and NZD have a high beta to China trade, and it is unlikely the outlook there will be positive today.

Although the dollar fell overnight against the G-10 currencies, regional currencies are unlikely to see the same gains. The fall was driven as much by trade jitters as it was by the impeachment announcement and regional Asia is much more sensitive to the former than the latter.


President Trump’s comments that he wouldn’t accept a softer trade deal with China opened the taps on oil as both Brent crude and WTI prices gushed lower. API Crude Inventories rising to 1.4 million barrels twisted the knife as Brent crude fell 3.30% to $63.20 a barrel, and WTI fell 2.80% to 454.50 a barrel.

Oil is now facing the genuine possibility of completely unwinding the rally spurred by the Saudi Arabia attacks ten days ago. With Iranian representatives attending the U.N. in New York this week, the odds of further mischief in the Gulf are probably low. For this week anyway. Without some movement from the U.S. on sanctions, it is hard to see it staying that way and being short oil could be a dangerous strategy.

In the short-term, however, the markets do look a little long, and negative trade soundbites are likely to cause further position culling. Asian trading will probably see oil meet plenty of sellers on any rallies unless we get another headline surprise.


Gold loved the uncertainty of the overnight session, powering through resistance to rise ten dollars, or 0.70%, to close at $1531.50 an ounce. The safe-haven trade was very much in evidence.

A close above the resistance at $1525.00 implies a re-test of the September high at $1557.00 is in play. For that to happen though, we will need to procession of negative trade and political headlines to keep feeding the rally. In a week like this, that is a 50/50 probability, and thus, although gold’s price action is impressively constructive, some caution is warranted at these levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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