Another political shock on the cards?

Europe is off to a good start on Tuesday and the US is expected to post decent gains at the open as well as we head into a massive few days.

It's difficult to look past the UK today, given the implications the result will have for the months and years ahead. Boris Johnson is and always has been the strong favourite to replace Theresa may as Prime Minister but in an age of political shocks, only traders seem completely convinced that an upset can not possibly be on the cards, or at least willing to back it.

The rest of us are left adding the caveat that stranger things have happened while looking for signs that this will be the latest and arguably biggest shock yet. The reality is that it's very unlikely to be. Johnson is an outspoken Brexiteer than does not fear no deal and therefore strongly appeals to the Conservative membership. For Hunt, who backed remain in the referendum, to overcome that would be incredible.

But with the pound having already suffered considerably - more than 7% against the dollar from the March peak - at the prospect of Boris as PM, how much further can it go in the near-term? If Boris is confirmed today, we may see initial weakness but that could be short-lived if profit taking kicks in. This could be a classic sell the rumour, buy the fact scenario. Of course, if Hunt is victorious then we could see significant upside for the pound given the prospects of a softer Brexit and determination to avoid no-deal.

Gold slips as dollar benefits from lower Fed expectations

It seems traders are finally starting to come around to the idea that the Fed is not going to cut interest rates by 50 basis points at the meeting next week. After rising to around 40% last week, the probability has dropped back to around 15% today and even that seems a little high given the New York Fed's clarification and Bullard's comments on Friday. The paring of expectations has been supportive for the dollar at the start of the week, knocking gold off its highs.

Momentum in the gold rally had already started slipping in recent weeks but as it stands, the yellow metal remains in bullish territory. Moreover, long-term, this is a positive environment for gold as central banks around the world battle to avoid an economic slowdown. The first test for gold looks to be around $1,400, having been the area it most recently found support. A new lower low could be viewed as a signal that traders are losing confidence in the rally in the near-term.

Oil traders relaxed about latest escalation in the gulf

Oil prices are trading a little flat on Tuesday. We have seen some marginal gains on the back of another escalation in the Persian gulf but it's hardly rocked the oil markets. The acts of aggression that we're seeing from all sides are worrying but not severe enough to justify a more serious conflict. None of this is to say it couldn't spill over into something more serious - accidentally or not - but right now markets are relatively relaxed.

Bitcoin slips below $10,000

Bitcoin has broken back below $10,000 this morning, with little appearing to drive the decline beyond it dropping out of the headlines after coming under much increased scrutiny in Washington in recent weeks. People don't seem to know how to take the news of increased scrutiny that could both bring the credibility to the space that many think its needed and positive for its development and challenges that could disrupt it. If bitcoin holds below $10,000 today, it could be a worrying sign putting much attention on the $9,000 level below.