US stocks rally, with Trump's impeachment enquiry hogging the news flow

USD rallies, stocks pop, Pound falls, oil drops

Wall Street rallied on fresh trade-war headlines overnight, however investors remain confused and concerned about what an impeachment inquiry into US President Trump could mean for financial markets. The USD ripped higher last night, with no discernible cause, and is not far from new multi-year highs. On the other side of the Atlantic, the Pound fell as Brexit-related optimism turned back into general confusion. Oil prices whipsawed, as traders struggle to determine whether supply disruptions, or weak global demand, is the primary determinant of activity in that market. The RBNZ met yesterday, but surprised-few by keeping rates on hold.

Stocks climb on new trade-war headlines

Market sentiment was juiced by a handful of stories yesterday and overnight, painting a more positive outlook for US-China trade negotiations. The first, which admittedly lacked profound impact, came from the Chinese, who announced it plans to increase purchases of US pork products. The real driver of risk-appetite, however, was a statement made by US President Trump, in which he expressed a “trade deal could happen far sooner than many think”. It’s difficult to argue that market participants truly believe either of these stories change the fundamental outlook for the trade-war. However, when a trade-headline is printed, it pays to have a punt on its impact.

Markets distracted by Trump-inquiry

It’s true consequences remain slightly obscure, but the dominant story last night was the unfolding Trump-impeachment drama. There’s the sense, as far as the performance of financial markets go, that this could all be a flash-in-the-pan. Indeed, yesterday’s stock-market sell-off was largely catalysed by the story. However, that was more of symptom of the shock induced by the introduction of a new risk-factor in the market. Uncertainty remains whether there’ll be a sustained impact on markets from an impeachment inquiry. In a press conference this morning, Trump denied any wrongdoing, and described the process as another “witch hunt” and “hoax”.

King Dollar fighting for its crown

Of market-specific concern, the USD spiked last night. A single cause is tough to ascertain as to why today the Greenback decided to rip higher. A combination of causes are being given. Continued funkiness in US money market, which is driving a search for USD, is one. A tumble in the Euro and Pound is another one. The release of the transcript of US President Trump’s conversation with UK President Volodymyr Zelensky, which showed little categorical evidence of misconduct, is possibly the favoured interpretation. The US Dollar Index is 0.3% shy of multi-year highs now, as the greenback keeps powering along its broad-uptrend.

Pound falls as Brexit optimism turns to uncertainty

As it applies to Pound, the optimism surrounding the UK Supreme Court’s decision to rule UK Prime Minister Boris Johnson’s proroguing of Parliament as “unlawful” was replaced with confusion, after a sitting in UK Parliament overnight offered a stark reminder that a Brexit resolution is no clearer or nearer. A no-confidence motion in the Johnson’s government appears, just for now, the likeliest next-chapter in the Brexit-drama. However, UK opposition Leader Jeremy Corbyn suggested he’d only back such a thing if October’s Brexit deadline is extended again. The Pound tumbled on the fresh uncertainty, pushing back into the 1.23 handle early this morning.

Oil back trading on demand concerns

There’s continued intrigue in the oil market, especially as it applies to determining what it ought to be driving the price right now. Oil prices dipped during overnight trade, after US crude oil inventories showed a smaller than expected drawdown last week, and Saudi Aramco reassured markets that it’s progressing ahead of schedule in getting production back to normal. Following a fortnight preoccupied with fears about undersupply and war in the Middle East, oil seems to be going back to trading on demand side concerns. The global economy is undoubtedly slowing down still, and that’s dragging on the outlook for oil demand.

RBNZ saves the surprises, keeps rates on hold

New Zealand met yesterday and kept interest rates on hold at 1.00%. After the last central bank's surprise 50 basis point cut at its last meeting, the RBNZ decided to adopt a far more predictable tact this time around. It was a familiar "let's-wait-and-see-what-the-other-cuts-do" tone taken by the RBNZ in explaining its decision, expressing that it's open to cutting rates again if it's needed "to support the economy and maintain our inflation and employment objectives". The market is expecting the next cut to come from the RBNZ and its next meeting, giving that outcome an 80% chance.