The Day So Far…
It goes from bad to worst for Donald Trump as the latest source reports from Reuters suggest Michael Flynn and other advisers to the President were in contact with Russian officials in at least 18 calls and emails during the last seven months of the Presidential race. Circulation of the report has prompted further selling of global indices with the likes of JPY seeing further strength while odds of a June rate hike at the Fed continue to fall sharply (60% from 100% 2-weeks ago).
The big question now heading into the North American crossover is will this trend continue. At the beginning of the day my answer would have been no, in that very rarely does the market see consecutive levels of high volatility without a new fundamental event occurring. The difference now though is that fresh news has been released and the situation seems to be worsening for the incumbent. At this point in time the calls of impeachment from Congressman Al Green are bold but unsurprising and I think what was more telling was the speech from the House speaker Paul Ryan and other GOP leaders who deflected attention away from the President. It is these comments from senior ranking Republicans that I would be monitoring closely in order to sense how much longer this risk aversion can remain. Also, from an objective point of view there would need to be overwhelming evidence of wrong doing to lead down the route of impeachment and at present the latest debacle has not quite hit the heights of the Watergate scandal.
Quick word on the latest UK retail sales report which came in above expectations, with anecdotal evidence from retailers suggesting that good weather contributed to growth. The initial reaction saw Cable break through the significant 1.3000 handle that had defined the top side of the range that has formed ever since the snap election was called back on the 18th of April. However, despite this move higher I think the consumer will continue to feel the squeeze going forward, and with inflation now at its highest since September 2013, and real wages turning negative for the first time in three years, it appears only a matter of time before the UK economy starts to feel the impact.
The Day Ahead…
As discussed above, today is all about monitoring developments on Capitol Hill and whether official comment is passed on the new information brought to light this morning and whether Trump’s colleges continue to stand by his side in this period of strife. As the Washington Post highlights Trump has mocked the disabled, belittled women, insulted Hispanics, and libelled Mexicans and yet he still serves. So to say this will be his undoing is yet to be seen and what I think would be the more prudent strategy is to remain flexible and not get emotionally involved into the political debate and simply follow the trend that materialises short-term.
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