While unlikely to succeed, the announced impeachment proceedings is disrupting markets, reports Adam Button.
U.S. House Democrats will start impeachment proceedings against President Trump in a move that's unlikely to be successful but could deepen political wounds.
The New Zealand dollar (NZD) is now paring earlier gains, which were initially triggered by the Reserve Bank of New Zealand statement coming out less dovish than expected. A heavy dose of Fedspeak Wednesday should be closely watched.
The British pound (GBP) gives up all of the post-Supreme Court decision gains as Boris Johnson returns to Parliament, vowing to keep Brexit on time.
President 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. Speaker Pelosi announced the formal inquiry late Tuesday after markets earlier moved on rumors it was coming.
The House of Representatives needs a simple majority to impeach, but a two thirds majority in the Senate is needed to convict and that's a longshot-at-best with Republicans 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 U.S. 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. an expected +1, 2) The Conference Board consumer confidence index slumped to 125.1 from 133.0, including a sharp drop in the expectations component and 3) President Trump took a hard line on China at the UN.
The 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.
Adam Button is co-owner and managing director of ForexLive.com and a contributor at AshrafLaidi.com. You can see Ashraf’s daily analysis at www.AshrafLaidi.com and sign up for the Premium Insights. Ashraf's Tweet on indices here.
