Equities Rebound on Trump’s Remarks, GBP Falls the Most Among the G10s
The dollar and US equity indices gained yesterday after US President Trump noted that a deal with China may be reached sooner than people expect. Among the G10s, the pound was the main loser, perhaps as buyers of the currency were disappointed by the lack of any progress in the first day of the UK Parliament’s return to work after the Supreme Court’s decision to rule its suspension as unlawful.
Trump Says a Trade Deal Could Happen Sooner than People Think
After tumbling on Tuesday, the dollar rebounded yesterday, and today, it is found higher against all but one of the other G10 currencies. The greenback gained the most against GBP, SEK and CHF, while the currency against which it failed to eke out any gains was CAD, with USD/CAD trading virtually unchanged.
On Tuesday, the dollar’s tumble came alongside the slide in equities and this was due to US President Trump’s harsh comments against China at the United Nations, but most importantly, due to the impeachment call by Democrats of the House of Representatives. The negative sentiment continued during the Asian and EU sessions yesterday, but everything took a 180-degree spin during the US session, with the US indices finishing their session in the green and the US dollar outperforming almost all of its major peers.
What may have lifted investors’ appetite and made them forget about the impeachment inquiry may have been fresh comments by the US President, who noted that a deal for ending the trade dispute between the US and China could be found sooner than people expect. These comments came after Trump and Japan’s PM Abe reached a limited trade accord, another development in support of the broader market sentiment.
Looking ahead, our view has not changed much. We still don’t expect Trump to be removed from office and that’s because a two-third support in the Republican-controlled Senate is highly unlikely to be secured. The big question is whether this story will weigh on his chances of being re-elected next year, and how this may affect his policies. The dilemma we were in was whether Trump will soften his stance in the US-China saga in order to revive his election chances, or whether he would trigger another round…