Thursday would see a hangover from Wednesday’s events namely the return of the UK Parliament and the announcement of an impeachment enquiry against President Trump.

Not the best of days for either the US President or the UK Prime Minister. GBP’s woes continued initially trading down to 1.2303, which in turn dragged EURUSD to a new low of 1.0923, marginally breaking the double bottom in place at 1.0927.

However both would bounce at the beginning of the US day, EUR back to 1.0960 and GBP to 1.2360.

US equity futures had pointed to a marginally higher open but that never materialised as all three major indices opened lower. Gold, which suffered as President Trump hinted at a trade deal sooner rather than later, makes gains to $1,512 as the risk sentiment deteriorates.

Crypto is still reeling from Tuesday’s sharp sell-off. Wednesday brought some mild relief but today sees another move lower with BTC dropping to $8,200 and ETH to $163.20.

On the data front US Q2 GDP came in as expected at 2.0% but US Pending Home Sales came in a little stronger at 1.6%.

Overall the markets ignored the data choosing to focus on the unwinding of USD long positions as concerns about President Trump’s conduct increase.

The DJ slips to -150, however European stocks remain positive on the day, with the FTSE up over 1%.

The afternoon sees a reversal of the morning’s FX moves with EURUSD down to 1.0909 and GBP to 1.2320 while stocks make back half of their earlier losses as it’s announced that China trade talks will resume on Oct 10.

The FX markets seem happy to buy USD on any dip and shrug off any potential woes that President Trump may face. Not the most conclusive of days, hopefully, Friday will provide some clarity.

A rangy sort of day with the USD ultimately winning out. On that note, I want to show you a daily chart of the USD index or DXY as it’s better known in technical circles.

If you go back well over a year, the USD has been slowly appreciating, no matter how many holes Mr Trump tries to dig for himself, no matter how bad the trade war has become and no matter what the Fed has begun reversing some of their more recent rate hikes.

In short, the USD is bid. And as Mr Trump has correctly pointed out, that’s as much about other countries weakening their currencies as anything else.

It will be interesting to see if this continues as we look ahead to an election in the US next year and whether or not the US decides to intervene to weaken the USD.

David Hannigan
Author

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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