White House Down – Trump’s Ultimate Mission?

The Latest

Reading the news wires in recent days, you would have to wonder what has happened to U.S democracy.

This week, there has been the talk of a coup. If the markets contrast recent political moves in the U.S to those in Asia and beyond, the coup is already unfolding.

Trump refuses to concede and has even replaced key officials with loyalists. For the Republican minority, these loyalists are not Republican loyalists but Trump loyalists.

In the 4-years of Donald Trump, we saw the rise of white supremacy and attempts to quash the Black Lives Matter movement.

He failed on one, while continued to avoid condemning the other.

So, the big question is whether U.S President Donald Trump has had ulterior motives since entering the Oval Office.

COVID-19 and the U.S President’s blasé views and mismanagement should have been an immediate red flag. Hindsight can be a wonderful thing… It wasn’t just COVID-19, however.

Friend or Foe?

If we look back at the last 4-years, other than Iran, Trump embraced key enemies of the U.S. Not only did he embrace them but even talked highly of them and called them friends.

Some of Trump’s buddies now include Kim Jong-Un and Vladimir Putin. Not a bad circle when becoming a property mogul once more.

Who needs a cold war when Trump is rubbing shoulders with such reputable political leaders?

Then throw in the clear intent to ruffle China’s feathers and attempt to disrupt peace in the Middle East.

Not only did Donald pull out of the Iran nuclear agreement, he also stepped back from responding to an alleged Iran attack on Saudi oil refineries.

His predecessors would certainly have responded to such a move by the Islamic Republic of Iran.

Then consider ISIS and the claim to have killed off ISIS. Europe continues to face terrorism and that is before considering what is happening in Turkey and the Middle East.

Global political disruption and anarchy seem to be the product of Trump’s presidency.

With all of this in mind, one then has to consider what Trump’s true intent was when entering office.

Clearly, the foreign policy rule book was thrown out the window. Worst yet, even the likes of China briefly attempted to be an advocate of globalization.

It didn’t last long, however. In response to ‘Making America Great Again’, China appears to be making China even greater.

While the U.S economy languishes in the 2nd wave of the COVID-19 pandemic, China has begun to flourish.

Even more impressive is the fact that China has reportedly reneged on its phase1 trade agreement obligations. Then consider democracy and China’s handling of Hong Kong. The U.S is currently in no position to chastise a failure of democracy…

On the trade front, it was always a matter of time and China bided its time and got the result that it wanted. A trade-friendly Biden President.

White House Down

Between now and Biden’s inauguration, there is plenty that can go wrong. The biggest threat is that Biden loses the election on a recount or court rulings. Even Republicans have talked these threat down, however.

So, all that is left is for Trump to hand over the keys…

Easier said then done. Will we see the White House Down? The movie involved shootings and more on the lawns of the White House. The film told the story of anarchy in the face of democracy.

Is Trump about to deliver a taste of theater to Capitol Hill?

With friends like Kim Jung Un and even Putin, who supposedly put Trump in office, it is a scary thought.

The markets are certainly calm over the threat of a political coup. Things may change, however, should we see Trump make use of his Presidential powers to further break the democracy of the U.S.

The National Conventions, the Election Polls, and More Social Unrest

The National Conventions

Over the last week, the news wires of been flooded with coverage from the national conventions. Biden and the Democrats went first, with Trump and the Republicans wrapping things up later today.

The Democrats

From the Democratic convention, a number of key takeaways included:

  • President Barak Obama was left with the task of attacking his successor Trump and the Republicans. While Obama talked of the Republicans destroying American democracy, Michelle Obama spoked of Trump being the wrong man for the job.
  • Presidential hopeful Biden delivered a better performance than many expected. It will come down to the live debates, however.
  • Harris impressed, bringing youth and energy to the convention.
  • The Democrats managed to avoid uncovering materially differing in-house views on policy and politics.
  • They did talk of climate change, gun violence, immigration, and healthcare, however.

In the 2016 Presidential Election, Trump’s campaign was to “make America great again.”

For Biden and the Democrats, it looks to be “Saving America.”

The Republicans

From the Republican Convention, there was also an attack on the opposition.

Interestingly, the Republicans through Tennessee Senator Blackburn talked of the Democrats wanting to create a Communist state. There was also the talk of law and order… Not the best topic considering the spout of high profile shootings across the U.S.

While there was increased interest in the Republican message, as TV viewings reportedly rose, the Wisconsin shooting couldn’t have come at a worse time…

Following the social unrest in the week, VP Pence is up today to enjoy a rare moment in the spotlight. Trump had given the Vice President the unenviable task of heading up the coronavirus task force. Trump hasn’t thrown his running mate under the bus, however, which has saved Pence’s political career…

So, all-in-all, nothing earth-shattering from the conventions and nothing to really impact the polls before the live debates.

The Latest Polls

According to the latest FT’s interactive Calculator and polling data, we’ve seen very little movement of late.

As at 26th August, Joe Biden was projected to win 298 Electoral College votes on Election Day, this was unchanged from 20th August, while down from 308 votes back on 5th August.

It was much the same for U.S President Trump, whose projected Electoral College vote count held steady at 119.

While unchanged from 20th August, this was down from 122 votes back on 5th August.

All in all, this meant that the number of fence-sitters also remained unchanged.

Looking more closely at the numbers, however, the FT Tracker showed Biden taking some success from the Democratic convention.

As at 26th August, Biden had 203 solid votes, which was up from 190 solid votes on 20th and 194 solid votes on 5th August.

By contrast, Trump has seen his solid vote count hold steady at just 80…

Key States

If we look at the key U.S states that tend to be election barometers:

Missouri continued to lean in favor of Trump and the Republicans, with Kansas also leaning in Trump’s favor.

For Biden, Illinois, New Mexico, and Oregon remained solid blues, with Michigan and Pennsylvania leaning in favor of Biden. New Hampshire continued to lean after having been solid in July.

Key states that remain on the fence included Texas, Ohio, and North Carolina.

The Road Ahead

As the Republicans look to wrap up the 2020 national convention, it will now come down to the debates.

For the Democrats, there will be a number of concerns and they may have to tread carefully…

Progress towards a COVID-19 vaccine and effective treatment hit the news wires this week. Both would be a boon for Trump and the Republicans who really had gotten things horribly wrong.

We have seen the NASDAQ and S&P500 reach fresh record highs, defying gravity.

And, we are seeing tensions between the U.S and China ease. Positive updates from both sides on trade and China’s promise of sticking to the phase 1 agreement couldn’t have come at a better time.

The big question is whether Trump has shifted tact too soon. November is still some way off and a lot can go wrong.

Unemployment within the U.S remains at unprecedented levels. While economic indicators have started to flash green, it’s not going to be plane sailing.

Social unrest is evident and the recent shootings will raise concerns over Republican heavy-handedness.

Really, it is remarkable that Trump is not trailing by more. This is more likely to be down to his opponent, however, than any recent Republican successes…

The U.S Dollar

At the time of writing, the U.S Dollar Spot Index was down by 0.13% to 92.885.

Trump will no doubt continue to take credit for the weakness in the Dollar and record-high equity levels.

Placing too much focus on it in August, however, could be a dangerous game. Risks remain tilted to the downside and there’s always the FED to spook the markets.

Powell’s scheduled speech from Jackson Hole will be the main event of the week. For Trump and the Republicans, however, unemployment is going to need to materially fall.

High unemployment and a Presidential Election are a bad combination for law and order. Even more so with Trump riling voters and drawing in the support of gun-wielding nationalists.

US Dollar Index 27/08/20 Daily Chart

Biden Announces His Number Two. The Polls Have Yet to Respond, However.

The Latest

Democratic front runner Joe Biden picked Kamala Harris as his running mate. A Democratic victory would make Senator Kamala Harris the first vice president of Indian-Jamaican decent.

Biden and Harris will also be looking to buck the historical trend by delivering the first woman vice president.

Now that the much-awaited announcement has been made, the markets will now look ahead to the political debates.

Harris is scheduled to debate Vice President Mike Pence on 7th October.

The Latest Polls

According to the latest FT’s interactive Calculator and polling data, which are as at 12th August 2020, Joe Biden has 298 Electoral College votes. This is down from 308 Electoral College votes back on 5th August and 318 votes in late June.

While Biden saw his total vote count fall, things were not much better for U.S President Trump.

Trump’s share of the Electoral College vote fell from 122 votes to 119 votes. The downward trend continued with Trump having had 128 Electoral College votes as at 29th July and 132 votes in the week prior.

Looking more closely at the numbers, however, there was little change in the share of solid votes.

Joe Biden had 194 solid votes, unchanged from 5th August, with Trump holding 80 solid votes, also unchanged.

Both saw a decline in leaning Electoral College votes, however.

Joe Biden saw leaning votes fall from 114 to 104, with Trump’s leaning votes decline from 42 to 39.

If we look at the key U.S states that tend to be election barometers:

Missouri continues to lean in favor of Trump and the Republicans, with Kansas also leaning in Trump’s favor.

For Biden, Illinois, New Mexico, and Oregon remain solid blues, with New Hampshire a solid blue. Michigan and Pennsylvania continued to lean in Biden’s favor.

A number of key states remain on the fence, however. These include Texas, Ohio, and North Carolina.

The Road Ahead

Economic data from the U.S continues to deliver positive news. It couldn’t come at a better time for a U.S President who has been trailing Biden since March.

Talks of further progress towards a COVID-19 vaccine is also positive for Trump. While labor market conditions show signs of improvement, there is a long way to go, however.

The key near-term remains an agreement on the COVID-19 stimulus package. Trump’s executive orders from the weekend wouldn’t have caused too much harm. Recent spin and improving economic conditions have failed, however, to narrow the gap for the U.S President.

The U.S Dollar

At the time of writing, the U.S Dollar Spot Index was up by 0.18% to 93.81.

While there was no major market reaction to the announcement, we can expect the markets to begin considering chatter as we approach September.

It will ultimately boil down to who is the most economically friendly. Until now, few would have seen anyone be more business-friendly than U.S President Trump. So, Biden and Harris will need to change that…

DXY 12/08/20 Daily Chart

Trump, the Presidential Election Polls, and the Economic Data

The Mood

It has been a week of distraction for the markets in the week ending 7th August. All eyes have been on Capitol Hill and the political wrangling over the COVID-19 stimulus package.

There was little surprise that the Republicans and Democrats would dig in their heels with less than 3-months remaining until the U.S Presidential Election.

While the markets focused on the lack of progress, Trump continued to downplay the COVID-19 pandemic.

On Wednesday, the U.S President once more diverged from medical experts stating that COVID-19 will “go away”. This view comes as the summer races on…

The comments were in contrast to Fauci, who stated that the pandemic may continue to hit the U.S through 2021 and possibly beyond. Fauci also stated that he would envisage effective vaccination next year.

For the U.S president, the polls have continued to show Joe Biden with a clear lead. The last time that the polls showed Trump ahead was before March.

This was before the COVID-19 pandemic reached U.S. shores.

At the time of writing, the total number of U.S coronavirus cases stood at 4,973,741. The U.S accounted for around a quarter of the 19,006,692 global cases. The total number of U.S COVID-19 related deaths stood at 161,608.

The Latest Polls

According to the latest FT’s interactive Calculator and polling data, which are as at 5th August 2020, there has been another shift in the numbers.

Once more, the numbers were not in U.S President Trump’s favor.

The FT has Democratic challenger Biden with 308 Electoral College votes. This has remained unchanged since a fall from 318 Electoral College votes held back at the end of June.

By contrast, Trump has seen a downward trend continue since the coronavirus reached U.S shores.

According to the latest FT poll, Trump had 122 Electoral College votes, which was down from 128 votes as at 29th July. A week prior, Trump had had 132 Electoral College votes.

Looking more closely at the numbers, there is some cause for optimism for the blues.

Joe Biden has seen the number of solid votes rise from 190 to 194, with leaning votes falling by 4 to 114. As at 29th July, Biden had had 190 solid votes.

For U.S President Trump, the number of solid Electoral College vote count increased from 77 to 80. The number of leaning votes fell from 51 to 42, however.

Back on the 22nd July Trump had had 115 solid votes and 17 leaning votes.

If we look at the key U.S states that tend to be election barometers:

Missouri continues to lean in favor of Trump and the Republicans, with Kansas also leaning in Trump’s favor. Kansas had been a solid Republican state mid-way through July.

For Biden, Illinois, New Mexico, and Oregon remain solid blues, with New Hampshire becoming a solid blue. Michigan and Pennsylvania continue to lean in Biden’s favor.

The Road Ahead

It all looks to hinge on the COVID-19 pandemic, labor market conditions, and the economic recovery.

As Trump continues to state that the pandemic will go away soon, there’s a lot riding on a vaccine.

If there’s no vaccine by the time of election day then that should write off Trump’s chances of a 2nd term.

Economic Data

The hope remains, however, that the reopening of the U.S and a pickup in economic activity will shift sentiment.

That hope remains only slight at present, however. Labor market conditions remain dire, in spite of the better than expected weekly jobless claims figures this week.

In the week ending 31st July, initial jobless claims came in at 1,186k, a first weekly decline in 3-weeks. Claims had stood at 1,435k in the week prior.

Today’s stats make tomorrow’s nonfarm payroll figures and the unemployment rate all the more important.

Last month, we saw the U.S President hold an unscheduled press conference in response to the record jump in June. We will likely see the same tomorrow should the numbers impress.

If they don’t impress, we can expect some chatter on Twitter. There’s China and now the Democrats to target for a rising number of reasons.

Either way, the NASDAQ at record highs and record jump in nonfarm payrolls have done little to narrow the gap for Trump and the Republicans. If impressive numbers fail to drive support for Trump, the U.S President may need to change tact.

The U.S Presidential Election, Trump’s Chances, and History

The Latest Polls

U.S President Donald Trump is not doing too well in the polls at the moment. It’s hardly surprising when considering the U.S administration’s handling of the COVID-19 pandemic.

Then there was the fumbling over the murder of Floyd George that led to nationwide protests and riots. And then the handling of the protests…

Sitting on Capitol Hill, the U.S President showed just how detached he and the Republicans are from the country.

Looking at the FT’s interactive Calculator and polling data, Biden looks set for an easy win come November.

Based on figures until 29th June, Biden and the Democrats are set to win 318 of the Electoral College votes. That’s well above the 270 needed to win.

Donald Trump and the Republicans are set to win just 148 of the Electoral College vote.

Looking deeper into the numbers, Trump would have to pull a rabbit out of the hat to swing things his way.

Of Biden’s 318 Electoral College votes, 120 are leaning in his favor, while 198 are solidly in his favor.

This is in stark contrast to Trump, where he has 33 leaning in his favor and just 115 solidly in his favor.

Just 72 college votes are up for grabs. These can go either way, with the difference in polls being less than 5%.

If you give Trump the 72 votes and assume he gets the leans that are in his favor, he would end up with 220 college electoral votes. That is 50 short of the total needed to win the 2020 Presidential Election.

It’s also mighty generous to give Trump all of the 72 votes that the FT classifies as a “Toss-Up.”

History

In 2020, the big question will be whether history will repeat itself…

If the FT’s polls are anything to go by, Trump is set to win the 2020 Presidential Election. That is making two assumptions:

  • Missouri is currently leaning in Trump’s favor and is not a solid Red. Trump would need to solidify Missouri’s support between now and Election Day.
  • History repeats itself…In the Presidential Elections between 1904 and 2016, Missouri has voted for the winning candidate in all but 3 elections. These anomalies were in 1956, 2008, and 2012.

Then there are the U.S states of Ohio, Nevada, Florida, and New Mexico. These are also considered to be strong indicators.

Looking at these states:

Biden has Florida and Nevada leaning in his favor, with New Mexico a solid blue. Ohio sits on the fence.

For Trump, perhaps Ohio will be the key to the Oval Office. No Republican president has reportedly won the Presidential Election without winning Ohio…

The Markets

If the global financial markets are anything to go by, there is still very little interest in the polls. Or, the markets are indifferent to who will be in control of the football come 2022.

This will certainly change as we move through the early part of the summer. We can expect both candidates to be far more vocal about their policies that may cause a stir.

After Trump’s 1st election race, it’s hard to imagine what will be on Trump’s list for a 2nd term.

There has even been the talk of Trump dropping out of the 2020 race. One thing that is not working in favor of Trump is the blaming of the COVID-19 pandemic on China. The other is simply calling everything anti-Trump as “Fake News.”

According to recent polls carried out by the Washington Post-Ipsos and New York Times-Siena College, COVID-19 and Floyd George have been the cause of Trump’s demise.

The Washington Post-Ipsos poll reportedly showed that 62% of adults disapproved of Trump’s handling of the protests.

In fact, the New York Times-Siena College poll reportedly came up with a similar number.

On COVID-19, the New York Times-Siena College poll also showed that 58% of adults disapproved of Trump’s handling of the COVID-19 outbreak.

It is hard to call polls as fake news and few would be able to justify forming an alternative view.

The Greenback

For now, the Greenback remains in the hands of market risk sentiment. As the pharma industry makes progress towards a COVID-19 vaccine, will it come in time?

A number of U.S states have hit pause on reopening plans. Only a widely available vaccine would allow the reopening to resume with gusto.

The latest COVID-19 numbers are certainly alarming. When considering the recent spike in new cases across the U.S, the negative views on Trump will likely increase…

A drop out from the Presidential Election race would be an acknowledgment of the President’s failings this year.

Trump has continued to call the polls as “fake news”. If he really believed this, however, then he wouldn’t be talking of dropping out of the race… That really would leave the Republicans high and dry.

Don’t expect the property mogul to give up that easily though… A game is likely afoot as Trump looks to spin is way back into contention.

Either way, the Greenback is unlikely to get too jittery just yet. There are far more important things to be worrying about in the coming weeks. COVID-19 and Trump deflection tactics are two that immediately spring to mind.

Trump Says no to Obamacare Again Leaving the Oval Office Door Ajar…

On Wednesday, the U.S equity markets took a hit in response to Trump’s COVID-19 warning.

The warning came in the wake of some quite dire coronavirus forecasts of between 100,000 to 240,000 deaths forecasted.

For the U.S President and the Republicans, the grim outlook couldn’t have come at a worse time. For the needy, Trump’s allure may have just evaporated.

One of Trump’s campaign pledges back in 2016 was to reverse Obamacare and just about every other move that his predecessor had made.

Obviously the U.S President had no idea that such a deadly virus would spread across the world and more importantly make the U.S the epicenter.

U.S Impact

Just this week, the U.S President rejected calls to reopen Obamacare enrollment, which left the healthcare system out of the reach of millions.

When considering the impact of the coronavirus on the older generation and those with preexisting health issues, the decision could become quite damming for the Republicans.

One key consideration here is that there is no way to reverse the effects of the decision. If there is, in fact, a sharp increase in coronavirus cases and related deaths, the Democrats will certainly highlight this as a route cause.

In fact, the Democrats and front runner Biden have already called Trump’s decision callous and likely to cost lives. This may not be too surprising but what is surprising is that Republicans have not pushed for an urgent review…

Unemployment surged by more than 3m in the week ending 20th March and another surge is expected in the final week of March. That will leave an even larger number of people, not only out of work but uninsured.

Obamacare?

The U.S administration’s handling of the coronavirus in the early days and the decision not to open Obamacare raises plenty of questions.

For the Democrats, Trump’s Achilles Heel would have to be farmers and blue-collar and employees under zero-hour contracts.

Late March’s $2tn Stimulus Bill may be substantial but it doesn’t cut it from a healthcare perspective.

ICU beds were reportedly as much as $4,300 per day back in 2010. That number is likely to be far higher now. $1,200 to each and every American certainly doesn’t cover the shortfall for those in need of insurance cover and treatment.

The Democrats may not have done too much better but that doesn’t really matter as they are not running the show.

The Numbers

Obamacare had given 20m more Americans health insurance. In the 1st half of 2018, 28.5 Americans were uninsured, 20.1m less than in 2010.

2010 was the year that Obama signed the Affordable Healthcare Act into law.

According to the Wall Street Journal, the number of uninsured increased for the 1st time in a decade back in 2018.

When you throw in the latest surge in the unemployed and upward trend in the uninsured, 28.5m could be back up to around the 50m level.

According to Worldometer, the combined population of France, Germany, Italy, and Spain currently stands at approximately 256.27m.

With the total number of coronavirus cases as at 1st April standing at 349,662, that is an infection rate of 0.14% of the population.

We are taking averages, as across the 4 member states there is also a spread in terms of median age and urban population.

For instance, France and Spain have the highest urban population percentages of 82% and 80% respectively. The demographic is significantly different, however. Spain’s median age sits at 45 versus 42 in France.

Italy’s urban population percentage sits at 69% but has the highest med. Age of 47. That explains the fact that both Italy and Spain have seen a larger number of COVID-19 cases.

Looking at the U.S, the med. age sits at just 38%, while the urban population sits at 83%. If we take the EU’s median numbers, with a U.S population of 331,002,651, that would mean 451,622 infections.

As at 1st April, the total number of infected had reached 215,344, with a mortality rate of 2.4%. The speed of the spread suggests that EU numbers are not comparable. One reason for this is the median age. An unwillingness to follow social distancing and containment measures will also drive up forecasted cases and deaths…

This is where the U.S administration failed at the outset in giving the coronavirus the attention it warranted. This is also where the U.S administration will likely fail in handling a surge in cases that are anywhere near the numbers forecast.

For the U.S economy, such an outcome will be debilitating. For U.S President Trump, a legacy would be left but not the one that he would have wished for…

2020 Presidential

Unsurprisingly, the U.S President and the Republicans have realized the errors of their ways. Trump hinted at taking advantage of federal programs to provide healthcare services in place of Obamacare.

It is, however, yet another example of a Republican Party well behind the curve.

At some point, the administration will not be able to play catch up. VP Pence is running the Coronavirus team, so it is not just Trump’s political career on the line. In fact, Republicans across the U.S could be tarnished with this brush…

As the virus spreads, it should no longer be about the election but about the people. The U.S President had been so concerned with blue-collar workers that he waged a trade war with China for 2-years… Surely he should be even more energized to deliver healthcare for the very people that he fought so valiantly for…

Looking at Trump’s odds of winning a 2nd term…

According to Oddschecker, Trump remains odds on favorite to win the 2020 Presidential Election. It is no longer a sure thing, however.

NY Governor Andrew Cuomo has seen his odds of winning jump from 250/1 to just 14/1. The improved odds are as a result of the governor’s handling of the coronavirus spread in NY.

Joe Biden has odds of 11/8, with Bernie Sanders and Mike Pence sitting back at 33/1 and 50/1.

The odds suggest that Pence is considered the fall guy in the administration’s handling of the virus. That has supported Trump but has also given Cuomo an eye on the Oval Office.

If Biden plays the Republican handling of the COVID-19 spread in the right way, however, he should see odds improve.

The markets are somewhat distracted by the impact of the coronavirus on the global economy. Expect attention to shift to the U.S Presidential Election, however. It is certainly not as cut and dry as many had anticipated.

Equity markets and the U.S Dollar will certainly respond in kind once the time is right…

Trump Impeached in the House! Is It Time for Gold Now?

Trump’s Impeachment, Explained

On Wednesday, the House of Representatives impeached Donald Trump. He became only the third U.S. president in history to be impeached, following Andrew Johnson in 1868 and Bill Clinton in 1998.

According to the Constitution, the President “shall be removed from Office on Impeachment for, a Conviction of, Treason, Bribery, or other high Crimes and Misdemeanors”. Democrats created two articles of impeachments which refer to these other high crimes and misdemeanors. The first one accuses Trump of abusing his power by pressuring Ukraine to investigate Joe Biden, the former U.S. Vice President, in order to interfere in the 2020 presidential election.

The House of Representatives also accused Trump of obstruction of Congress by directing administration officials and agencies not to comply with lawful House subpoenas for testimony and documents related to impeachment. The abuse of power article was passed on a 230-197 vote and the obstruction article was passed by 229-198.

Trump denies any wrongdoing, calling the impeachment inquiry a “witch hunt”. Who is right? Well, we do not know. We are neither Trump’s supporters, nor Democrats’ fans – but let’s face it: the whole process is very political. Democrats are still furious after Hillary Clinton’s loss in 2016 and hate Trump. They hoped for several months that “Russiagate” would enable them to remove Trump from office, but it didn’t work out. So they are taking their chances once more, although the White House’s record of the call between Trump and Ukraine President is far from being a clear case for high crime, especially when you compare it to the Watergate scandal or Bill Clinton’s lying under oath about his sexual relationship with Monica Lewinsky.

However, there may be more to the story than politics and hatred of political parties. We mean here the hostility of the so-called “deep state” or “intelligence community” directed at Trump who is an outsider. Interestingly, even mainstream media started to notice that there is a real enmity between Trump and agencies such as the CIA and the FBI (to be clear, we do not claim that Trump is without sins, but that there is a kind of bias against Trump among the so-called establishment).

Anyway, impeachment does not imply removal from office. No president has been ever removed from office by impeachment and Trump is not likely to become the first one. That would require a two-thirds majority in the Republican-controlled Senate. So, at least 20 Republicans would have to join Democrats in voting against Trump to convict him. This is unlikely to happen.

Implications for Gold

What does the impeachments theater mean for the gold market then? The risk of impeachment should theoretically support the safe-haven assets such as gold. However, given the low odds of Trump being removed from office, the markets are little moved. The yellow metal also has shrugged off the news from Washington, DC, as the chart below shows.

Chart 1: Gold prices from December 16 to December 19, 2019

The price of gold has increased the following day, but it can hardly be called a rally. Having said this, the end of year is positive for the gold market, given the unfavorable environment. I mean here the fact that the phase one trade deal between the U.S. and China was signed, while the Conservative Party’s victory in the UK parliamentary elections cleared the path to Brexit in 2020. As two important headwinds for the global economy softened, one could reasonably expect that the price of gold would dive. After all, the risk appetite came back to the markets, bond yields increased, while equity markets reached record highs. And yet gold remained in a narrow trading range of $1,460 and $1,480. It seems that the yellow metal is preparing for a big move – now the question is in what direction (fundamentals suggest rather a decline, while the gold seasonal pattern favors an increase).

Chart 2: Gold True Seasonal Chart for Q4 2019

Depending whether you are a bull or a bear, we wish you to be content with the upcoming move!

We hope that you behaved well all the year and that Santa Claus will not impeach you… Merry Christmas!

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

Arkadiusz Sieron, PhD
Sunshine Profits – Effective Investments Through Diligence and Care

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our Trading Alerts.

USD/CAD Daily Forecast – World Eyeballs Towards FOMC Decision

The Loonie pair was stuck in the lower part of the Chart near 1.3365/82 range level in the Asian session. The pair had managed to remain sustained within the top marks near 1.3430/00 levels since last few sessions. However, the previous day’s slip from its weekly high brought in a 0.51% drop in the pair’s overall movement.

The USD/CAD pair had suffered such a sharp pullback as the Oil continued to gain on Wednesday. The Crude prices had soared more than 5% yesterday, shooting from $51.75 bbl reaching $54.44 bbl. The Global demand for the commodity increased after Trump tweeted about his next week meet with Xi. Last day, President Trump mentioned that he had a “very good” call with the Chinese President. Trump added that he would have an extended meeting with Xi in G20.

Another supporting point for the Crude upsurge was the rising Middle East tensions. The US continued to blame Iran over last Thursday’s attacks. Anyhow, Iran repeats denial of the same. The US is deploying about 1,000 more troops to the Middle East for what Washington said were defensive purposes, citing concerns about a threat from Iran.

Nevertheless, the OPEC and non-OPEC members would meet up on July 10-12 to discuss regarding the extension of supply cuts.

Last night, the API Weekly Crude Count since June 14 reported -0.812 million over previous 4.850 million. A decline in the weekly figures hinted of a significant rise in the commodity prices. Hence, the USD/CAD pair might continue to experience an opposite effect out of crude upliftments.

Significant Economic Events

Forex traders keep their eyes glued to the FOMC meeting scheduled at around 18:00 GMT. Trump had earlier displayed his dissatisfaction with the Fed’s monetary policies. The President had urged the Fed many a time for an interest rate cut. However, the Fed appeared to follow its own set of protocols staying neutral. Chairman Powell believes that the US economy is still stronger and expects a recovery soon out of near term fall. Anyhow, Trump plans to fire the Fed Chief, depending upon today’s statements.

On the Canadian front, Street Analysts stay bearish over the BoC YoY May CPI Core. The Index will come at around 12:30 GMT.

Technical Analysis

1-Hour Chart

USDCAD 60 Min 19 June 2019
USDCAD 60 Min 19 June 2019

The uptrend in the pair’s movements seemed to divert path and lose hold of the positive trend. The short term 50-days SMA had already reached above the pair developing strong bearish stances. Also, the 100-days SMA was moving head-to-head with the pair, looking for opportunities to jump above the pair. Though the sentiment is negative in the near period, the pair stood well above the 200-days SMA. This position of the most significant SMA creates hopes for the positive trend to revert soon. Since the last few sessions, the RSI was lingering near 40 levels.

4-Hours Chart

USDCAD 240 Min 19 June 2019
USDCAD 240 Min 19 June 2019

From a broader view angle, the pair seemed to struggle to maintain the uptrend. Anyhow, the pair was taking rounds in the third level of Gann Square signaling trend sustainability. At the time of writing this article, the USD/CAD pair was resisting to move above the Gann arc. However, any movement below 1.3373 levels would put an end to the upward rally.

Trump Exonerated, Global Equities Fall On Recession Fear, Asian Markets Lead Rout

U.S. Investors Breathe A Sigh of Relief

The U.S. index futures were indicating a flat to a mildly positive open for equities markets on Monday. News that the Mueller Report did not conclude Trump or his administration colluded with the Russian’s during the 2016 campaign. According to a summary sent to Congress, the Attorney General finds insufficient evidence to pursue criminal actions.

Investors cheered the Trump news as it alleviates many worries that have been plaguing the market. With the investigation behind us, Trump can turn his focus to finalizing a trade deal with China and the second round of tax cuts to be aimed at working-class America.

In trade news, Secretary of State Steve Mnuchin and Trade Ambassador Robert Lighthizer are going to Beijing later this week. This will be the third round of high-level talks and have the market hopeful a deal will be reached soon. Many experts believe a deal will be struck mid-April but there is no guarantee of that. There is no economic data scheduled to be released today and very little this week. The most important data point will be the PCE Price Index released on Friday.

A Plot To Oust May And Hard Brexit Plague EU Markets

Reports surfaced over the weekend that ministers and MPs opposed to Theresa May’s Brexit plan are plotting to remove her from office. The reports were refuted by May’s allies but do not alleviate the concern of Hard Brexit. The EU has agreed to extend the March 29 deadline but only conditionally. If May cannot garner more support for the Brexit Deal the EU may force a hard-Brexit. The FTSE led the market lower with a loss near -0.60% followed by a -030% decline in the DAX and CAC.

In stock news shares of LVMH plunged more than -8.0% after what was reported as a “fat finger” mistake. A fat finger mistake is when a trader accidentally buys or sells too many of a stock or the wrong stock. The multi-national luxury goods conglomerate recouped much of the loss but were still down about -0.50% at midday. Shares of German pharmaceutical firm Bayer were down about -2.0% after receiving a downgrade from Merril Lynch. The company is facing major damages after a court ruled a man’s cancer was caused by Roundup, a weed killing product produced by Bayer’s Monsanto unit.

Asian Markets Plunge, Japan Down -3.0%

Asian markets plunged in Monday trading because of the U.S. yield curve inversion. A yield-curve inversion is when a longer maturity bond’s yield falls below a shorter-maturity and is widely viewed as a signal of recession. The inversion occurred on Friday when the U.S. 10-year bond yield fell into negative territory and below the 3-month T-bill for the first time in over 10 years.

The Japanese Nikkei led the market lower with a loss of -3.0%. Shares of Softbank and Fanuc were down -5.0% and -3.80% respectively. The Shanghai Composite and Hong Kong Hang Seng were both down about -2.0%. Shares of Tencent led with a loss of -3.0%. The Korean Kospi also fell about -2.0% and was led by SK Hynix -4.0% decline. The Australian ASX posted a more moderate loss of -1.11%.

The Mueller Report: Trump Survives to Fight another Day

It’s been a long time coming, but after a lengthy investigation into the U.S administration’s presidential campaign, Trump lives to fight another day.

Special Counsel Robert Mueller investigated the U.S administration for what felt like years. The markets even gave up on the report. A lack of an interview with the U.S president throughout the investigation did raise some eyebrows, however.

“No Collusion, No Obstruction, Complete and Total Exoneration. Keep America Great!” was President Trump’s Tweet to the news. One does wonder whether there were any hot under the collar moments. After all, the investigation didn’t come without its victims…

Who Went Down

The investigation led to Robert Mueller handing out jail sentences like hot dinners…

Top of the food tree was a jail sentence for Trump’s campaign chairman Paul Manafort. Others who pled guilty, included Michael Cohen, Michael Flynn, George Papadopoulos, Richard Pinedo, Alex van der Zwaan, and Rick Gates. The nature of the criminal findings will no doubt question the validity of Mueller’s findings.

Trump and the administration will be delighted, however, and rightly so. Too many people went to jail and an even larger number were charged by the special counsel. Not even one slip of the tongue. The final high profile case that remains is against Roger Stone. As a long-time Trump adviser, Mueller charged Stone with obstruction, lying to Congress and witness tampering. Well, the President didn’t get his hands dirty, but his team certainly did.

The Aftershock

Needless to say, the Democrats were less than amused. As is the case in any criminal investigation, beyond a reasonable doubt is the line that needs to be crossed. A lack of evidence was attributed to the Mueller report conclusions.

Interestingly, Rudy Giuliani said that the report was better than he had expected…

Almost 2-years of investigations and 2,800 subpoenas, not to mention the man hours, search warrants and interviews, delivered zip.

2020

The showdown between Trump and Bernie Sanders is now on for 2020. Hillary Clinton managed to scupper Sanders’ chances last time around and, while Oprah Winfrey is in the fray this time around, the Democrat’s chances are looking slim…

Too many candidates will be in favor of a 2nd republican term unless Trump tanks the U.S economy with his trade war. Not completely implausible considering the recent spate of disappointing stats out of the U.S and the FED’s shift on monetary policy.

For now, geopolitical risk is off the table, on Capitol Hill at least. Onwards and upwards. At the time of writing the future markets were in the green, though it remains to be seen whether they can hold on…

USD/CAD Overview – The Pair Breaking Last Day’s Major Resistance

The USD/CAD pair has shown a strong resilience since Thursday Morning’s Opening. Even though the USD/CAD pair saw some selling pressure in the beginning hour, it reversed its trajectory and came back strongly. The pair saw it’s intraday low of 1.3279 before coming up.

USDCAD 5 Min 21 March 2019
USDCAD 5 Min 21 March 2019

The pair failed to keep the gains at its first breakout attempt of crossing major resistance level of 1.3310. The second attempt by the pair seems to be a legit one, and there seems to be a bullish pressure on the USD/CAD pair. As of writing this article, the pair continues to uptrend and is likely to end the day on a positive note.  

On the release front, Two low impact data announcement is lined up at 1230 GMT.  

  • Automatic Data Processing, Inc (ADP) is expected to release the national employment change number for February. ADP had measured 35.4K number for the previous month.  
  • Statistics Canada is also about to come up with the change in the Wholesale Sales number taken place during January. Analysts are highly bullish on the sales number and expect it to grow by 0.5%. The Wholesale Sales change reported for December was 0.3%.

On Tuesday, the Canadian government forecasted of having higher than the anticipated fiscal deficit of C$19.8 Billion for 2019-20. The government announced that it would be issuing 20% more bonds in 2019-20. This fiscal budget is expected to increase the Gross Domestic Product number by 0.2% for 2019. On Wednesday, the Fed’s monetary policy announcement and the Crude Inventory Reports kept the pair under bearish stance.

Thursday morning saw oil prices were pushed down over the recent news on US-China trade talks. President Trump recently mentioned that the US tariffs might remain in China for a certain period before getting abolished outright. US Crude Oil futures tumbled by 0.3 percent reaching $58.86 per barrel.

The Retail Sales and the Canadian Inflation Report for January and February 2019 respectively will be released on Friday.  

By around 13:31 GMT, the pair was trading at 1.3310 level and sustained between the range of 1.291 and 1.3311 levels.

Can Donald Trump Be Impeached?

Last week, in the space of a few hours, Donald Trump’s former attorney Michael Cohen and ex-campaign manager Paul Manafort were found guilty by courts in New York and Virginia of a range of crimes. In addition, two longtime Trump associates, Allen Weisselberg and David Pecker have been given immunity from prosecution.

These developments have led to speculation that these Trump loyalists are co-operating with prosecutors and a case may be built against the President. This, in turn, has led to speculation that Donald Trump will be impeached. So, what are the chances he will be impeached, and what are the implications for financial markets if he is?

The Impeachment Process

Firstly, it’s important to point out that impeachment and removing the President for office are not the same thing. Impeachment is a process whereby the President can be removed from office, but it can also result in acquittal. In fact, no US President has ever been removed by impeachment proceedings. Presidents Bill Clinton and Andrew Johnson were both impeached and acquitted. On the other hand, Richard Nixon resigned in the face of impeachment proceedings which may well have resulted in his removal from office.

For impeachment proceedings to begin, a majority in the House of Representatives need to agree by vote that there is a reason to suspect the President, or any other officer, of treason, bribery or other high crimes and misdemeanors. These crimes are not clearly defined, and so the majority must also agree that the crimes committed can be classified as impeachable offenses.

This vote is preceded by the House Judiciary Committee drawing up articles of impeachment which lay out the accusations to be examined.

If the House votes in favor of impeachment, the articles of impeachment are passed on to the Senate. The proceedings take the form of a trial presided over by the chief justice, with selected senators acting as prosecutors. The accused is also given an opportunity to defend themselves.

The Senate then votes on each article, with a two-thirds majority being required for a guilty verdict. In the case of a guilty verdict, the punishment is then handed down.

Midterm Elections may be more important than the alleged crimes

Michael Cohen has already pleaded guilty to campaign finance violations, which he implies Donald Trump instructed him to commit. This is the only serious crime which has so far been alleged, and whether or not it would amount to an impeachable offense.

If evidence of collusion with Russia was proven to have occurred, with Trump’s knowledge or involvement, that would probably qualify as treason – but so far no concrete evidence has been suggested. There is endless speculation of other crimes he could be charged with, but again, no concrete evidence has been presented publicly.

It seems clear that Trump’s enemies are keen to see him removed by any means possible. Meanwhile, the GOP appears happy to defend him as long as his base supports him. That means the makeup of the House and Senate is of critical importance. If the Democrats control the House (with 51%), they may push forward regardless of how strong their case is. They will struggle to get 67% of the votes in the Senate (unless they somehow win over 60% of the Senate seats, but they may push forward regardless). This would be likely to result in a long, disruptive process.

The outcome of the mid-term elections in November is therefore of critical importance. Regardless of the strength of the case against Trump, there’s a good chance impeachment proceeding will begin if the Democrats win more than half the seats in the House. If they don’t, the probability is far lower.

How will markets react?

The common belief is that if a strong case for removal of the President by impeachment exists, a President will resign rather than face the humiliation of being impeached and removed. However, Donald Trump is a fighter and may be inclined to fight regardless of the case against him.

There is also the possibility of a weak case being made, the possibility of the House remaining in GOP hands and the possibility of new more serious charges emerging. In other words, there are several possible scenarios that could play out.

For markets, the worst-case scenario would be a long drawn out impeachment trial. Regardless of the outcome, the process would be disruptive and would lead to uncertainty. Impeachment proceedings would distract from other issues being dealt with by US lawmakers. They may even lead to geopolitical instability if Trump was seen as weak.

That sort of scenario would be bad for emerging markets and their currencies, which have already had a bad year. On the flipside – it would probably be good for safe-haven assets, and even for the US Dollar. It may also allow Jerome Powell to continue raising rates without any pressure from the President.

For the US economy and equity market, the effect of impeachment proceedings would depend on their effect, if any, on trade relations. For the most part, the US stock market is strong and corporate earnings continue to grow. The trade war is only affecting certain parts of the economy. Tax cuts and deregulation have already been enacted and unless there was a clear path toward his policies being reversed, corporate profits would be safe. That said, if impeachment proceedings were to begin, there would probably be an initial sell-off followed by a period of volatility.

In the event of Trump suddenly resigning, there may be an initial selloff of any risk assets including equities and emerging market currencies, but it would likely be short-lived. VP Mike Pence would take over and his priority would be to provide stability. This may actually provide a buying opportunity for emerging market currencies.

In the event that nothing happens – no impeachment and no resignation – which may still be the most likely scenario – then markets will remain focused on the emerging market rout and trade relationships around the world. In fact, over the next six months, the focus may even move to the UK’s Brexit and its effect on the UK and European trade.

Turkey and Erdogan under Pressure as the Turkish Economy Crumbles

It’s been a torrid time for a number of emerging economies, as the U.S President goes down his list of must-dos and, while the early days of the U.S Presidency saw North Korea, Iran, and China grab most of the headlines, Turkey has not been left unscathed.

The threat of U.S sanctions has riled the global financial markets and sentiment towards the Turkish Lira and 10-year government bonds and like any emerging economy, the exodus from government bonds has led interest rates to 20% this week, as the Turkish government looks to stem the tide of a mass pull out of much needed foreign investment into the country.

Unlike other economies, including Iran, Erdogan is unable to rely on exports alone, with the withdrawal of foreign investment and the threat of sanctions a taster of what could lie ahead for Erdogan, who is coming under increased pressure to release detained U.S pastor Andrew Brunson, the detaining of Brunson the ultimate cause of the threat to hit Turkey with crippling sanctions that could ultimately lead to a possible default on government debt and even worse, a bail out from the IMF that would likely leave Turkey in the wilderness for years.

While Brunson has been held captive since late 2016, the increased intentions of U.S President Trump to deliver on its promise to protect U.S citizens means that while some threats of sanctions may ultimately end up in finding common ground, the U.S President is unlikely to waver and will ultimately deliver on the threat should Brunson not be released.

One wonders whether Brunson is the sole motivation for the U.S administration, with Turkey has become a hotbed for terrorist activities, a number of high profile attacks in recent years have shocked the world, with Erdogan seemingly unable to or unwilling to take the fight to his immediate neighbors.

Thrown into the mix has been Erdogan’s election victory in June that came with new powers, shifting Turkey’s political landscape from one of a democratic parliamentary system to a presidential system, ultimately giving Erdogan total autonomy over what many have begun to consider a rogue nation.

While Erdogan may have suggested that the increased power over the country would ultimately deliver stability, following the 2016 coup attempt, and prosperity, the latest events and Erdogan’s failure to identify signals that have contributed to the current state of affairs will leave many wondering over what lies ahead for the ailing economy.

Year-to-date, the Turkish Lira is down a whopping 40.64% against the U.S Dollar and 10-year government bonds hit record lows earlier in the week, driving yields to 20% before easing back to around 18%.

While a Turkish delegate is on its way to Washington in attempt to appease a situation that could spiral out of control for the Turkish leader and ultimately the economy, the U.S administration may have other intentions, with a request to cut ties with U.S enemy #1 Iran likely to be on the list.

One thing is for certain, Trump will be looking to leave Erdogan in as much isolation as possible to avoid a reprisal down the road and with that in mind, it will be of particular interest to see how the Turkish President can turn things around and draw in foreign investment at an already challenging time.


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The easiest solution would be to snuggle up to the U.S and become a true ally in the Middle East, though the very isolation would certainly rile Erdogan supporters at home and abroad, not to mention, leave the country more exposed than ever to reprisals from Middle East factions that could ultimately kill off what’s left of the Turkish tourist industry, once and for all.

Double-digit inflation, foreign currency debt, a surge in the cost of imports that Turkey depends upon for any goods that it delivers overseas and Erdogan’s unwillingness to allow the Turkish central bank to raise borrowing costs are a combination that paints a bleak picture and these are all before a possible meeting gone wrong in Washington.

The Trump – Putin Helsinki Show

While Trump was credited to the ‘Art of the Deal’ along with journalist Tony Schwartz, references to which have left the global financial markets in sometimes bewilderment, some of the negotiation tactics seem to be more akin to Sun Tzu’s The Art of War than the Art of the Deal. The U.S President appearing to have finally decided that The Art of War may ultimately be a better reference point as he goes about his business alienating allies while embracing the enemy.

“If you know your enemies and know yourself, you will not be imperilled in a hundred battles; If you do not know your enemies nor yourself, you will be imperilled in every single battle,” is perhaps one of the more famous quotes, though Trump may have taken this from the Godfather Part II, where Michael Corleone said “My father taught me many things here – he taught me in this room. He taught me – keep your friends close but your enemies closer.”

So, with the Helsinki mission complete, there has been plenty of noise since and, while Trump may look to refer to Sun Tzu or heaven forbid, Michael Corleone, the rest of the U.S administration, the Senate and U.S allies may have an altogether different take on Monday’s events.

It didn’t take long for House Speaker Paul Ryan to give his views, stating that the U.S must be focused on holding Russia accountable and putting an end to its vile attacks on democracy, adding that the President must appreciate that Russia is not an ally and remains hostile to the most basic values and ideals of the U.S.

From the press conference, there were a number of key takeaways that included:

  • A common intent by both to improve Russia – U.S relations and develop a reasonable degree of trust.
  • Trump failed to vilify Putin for Russia’s meddling in the 2016 presidential election, with both Trump and Putin agreeing that there had been no collusion in the election.
  • The Russian President said that a working group of U.S and Russian businessmen will be put together.
  • On Syria, there was clearly some discussion as had been anticipated, though no details were shared, Trump merely stating that the two nations could save hundreds of thousands of lives in the country, while Putin aired his concerns over the number of refugees that had been displaced.

Clearly, the failure to address Russia’s meddling in the presidential election was the most troublesome, particularly when the investigative team, led by Robert Mueller, has just indicted 12 Russians on evidence of election meddling. Putin was kind enough to offer the investigating team with access to Moscow to clear any wrongdoing, though we can expect this to be staged if Mueller even decides to follow Trump down a very slippery slope.

On Syria, one shudders to think what had been discussed, particularly when considering Trump’s single desire to bring down the Iranian regime and at any cost. Time will tell, but if there is anyone more versed in the Art of War, it is probably the former KGB agent than U.S property mogul turned leader of the free world.

So all in all, while the U.S President alienates the EU and China and NATO members, he has to date, befriended Vladimir Putin and Kim Jong-un, both of whom have, by various preceding Presidents of the United States, been referred to as public enemy number 1.

The Dollar retreat reflected the market’s view on the press conference and NATO members and the EU may well be wondering what’s next, perhaps Sun Tzu’s quotes need to be heeded by both and anyone else who has been on the receiving end of Trump’s Art of the Deal. As for China, well no doubt Chinese Premier Li is aware of ancient Chinese military strategist Sun Tzu and his works.

Markets Shunted into Risk Aversion as US President Looks to Add $200B in Tariffs Against China

This led to a selloff in stocks wiping out all of yesterday’s modest gains and eating into the gains from Monday. Risk off extended to other markets as traders flew to safety with the yen gaining in value, USDJPY fall from 111.263 to 110.791, while AUDUSD took a hit falling from 0.74728 to 0.74045. The market is now waiting for the promised Chinese response, who said the US action was “shocking” and “unacceptable” and that they have no choice but to respond. Risk off sentiment is expected to dominate the European session.

UK Industrial Production (May) was -0.4% (MoM) and 0.8% (YoY) against an expected 0.5% (MoM) and 2.7% (YoY) from a previous -0.8% (MoM) and 2.9% (YoY) which were revised to -1.0% (MoM) and 1.6% (YoY) respectively. This data missed expectations and the previous readings were revised lower showing weakness in the sector but there the numbers did improve from last month’s readings. Manufacturing Production (May) was 0.4% (MoM) and 1.1% (YoY) against an expected 0.7% (MoM) and 3.1% (YoY) from -1.4% (MoM) and 2.9% (YoY) previously which was revised to -1.3% (MoM) and 0.9% (YoY). This figure improved but not as much as was forecast with the monthly data returning to positive territory. The negative impact from Brexit is continuing to plague the economy as orders are delayed and production postponed. The UK got a new data metric in the form of GDP (MoM) today. The expectation was for a reading of 0.3% and the data came in on target at 0.3%. GBP weakened as a result of the data release because the expectations were missed despite the uptick from previous readings with GBPUSD falling from 1.32936 to 1.32340.


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German ZEW Survey – Current Situation (Jul) was 72.4 against an expected 78.0 from a prior 80.6. ZEW Survey – Economic Sentiment (Jul) was -24.7 against an expected -18.2 from -16.1 previously. These data points have continued to soften as the economic data in Germany and the wider Eurozone disappoints. The deteriorating trade environment is also a head wind for business outlook with global trade war fears concerning participants. In April the sentiment reading dropped below zero and continues to decline. If these issues continue then sentiment will weaken further as businesses hold off on investments and expansion creating a negative cycle. The EUR weakened as a result of the decline with EURUSD slipping from 1.17263 to 1.17144.

Canadian Housing Starts s.a (YoY) (Jun) were released with a reading of 248.1K against an expected number of 210K from a previous 196K last month which was revised down to 193.9K. This data is showing a strong performance beating the expected number. Last month’s reading was revised down a little. CAD weakened against the USD from 1.31280 to 1.31435 in an odd reaction but reversed 15 minutes later with stronger Canadian Building Permits data. This can possibly be explained by the expected hike in Interested Rates from the Bank of Canada today. The BOC would see this strong data as a sign that rates can be comfortably increased with CAD expected to weaken against the USD if they do increase.

  • EURUSD is down -0.13% overnight, trading around 1.17289.
  • USDJPY is up 0.07% in the early session, trading at around 111.067
  • GBPUSD is down -0.09% this morning trading around 1.32618
  • Gold is down -0.36% in early morning trading at around $1,250.96
  • WTI is down -0.88% this morning, trading around $72.43

This article was written by FxPro

Trump’s Trade War: The Good, The Bad, and the Ugly

In a series of moves that have frequently been described by the media as a “trade war”, President Donald Trump’s recent approach to international trade has attracted a significant amount of attention from all sides of the political spectrum. While supporters of these policies believe that these moves may be able to encourage American manufacturing and help make international trading more “fair”, those who are against these moves frequently sight concerns of increased costs and international conflict.

As is the case with most major political changes, this particular series of moves enacted by what can only be described as a relatively unorthodox administration and probably cannot be described as entirely good or entirely bad. A proper analysis of Trump’s trade war will undoubtedly require a nuanced examination of all possible future outcomes. This article will briefly examine the core components of these new trade policies as well as the best and worst case scenarios that may come as a result.

Breakdown of Trump’s Approach to Trade

Since his initial campaign in 2016, President Trump has consistently discussed his intent to return manufacturing jobs to the United States. For individuals working in industries that appear to have lost a significant number of jobs to Mexico, China, and elsewhere overseas, the promise of reversing the job flight trend was undoubtedly appealing. Though the ways in which Trump would “return” these jobs to the United States was often quite ambiguous during his campaign, these promises were likely a significant reason that Trump was able to successfully win the rustbelt swing states of Pennsylvania, Ohio, Michigan, and Wisconsin.

Leading up to the beginning of the “trade war”, one of the most frequently cited reasons for the change was the fact that while the United States only exports $169.8 billion in goods to the People’s Republic of China, $478.8 billion in goods is imported into the United States. The $648.5 billion in exchanges that take place between the United States and China is believed to be the largest between any two nations in the world, as is the $309 billion deficit that currently exists between them.

Other concerns referred to by Trump and his administration include another large trade deficit with Mexico (exports $276.2 billion, imports $340.3 billion), which is not only a nation that offers significantly more affordable labor but is also a partner in the North American Free Trade Agreement (NAFTA). Additionally, concerns regarding intellectual property rights and the steel industry, in particular, have often frequently been cited by Trump and other advocates calling for change.

The use of tariffs in order to combat the current trade imbalances—which the administration seems to firmly be against—is a bit of an old-fashioned approach to international diplomacy, but one that is relatively unsurprising. Trump’s most recent moves include 25% tariffs imposed on roughly $34 billion worth of goods being imported from China (yielding estimated tax revenues of about $8.5 billion). These tariffs primarily target steel, aluminum, manufactured washing machines, solar panels, and numerous other goods.

Trump’s approach to trade marks a significant departure from the movement towards global free trade that characterized the administrations of both his Republican and his Democratic predecessors. In fact, since the Trade Agreement Act of 1934—one that was aggressively forged in reaction to the Great Depression—dutiable import tariffs have decreased from what was once nearly 60% to what is currently less than 6%. The effects of Trump’s approach to trade are yet to be fully seen. If this administration hopes to sincerely claim that the trade war was worth the costs, they will need to produce some justifiable outcomes.

The Good (Best Case Scenario)

For the sake of both the Trump administration and the United States as a whole, the best possible outcome from this trade war will be that the tariffs encourage investment in the United States economy and possibly localize certain manufacturing positions. As the two largest economies in the world, investors are constantly reevaluating whether to make their next marginal investment in the United States, China, or somewhere else. If the competitive advantage of manufacturing steel in China can be temporarily decreased, then investing in American industries may seem to be a relatively more attractive option.

In order for capital to be transferred from Chinese to American markets, the Trump administration will likely need to act quite quickly. Though many investors are certainly not shy about their general preferences for keeping their capital in American and European markets, one of the primary reasons for doing so is that these markets are comparatively far more stable than those outside the OECD. If the administration is unable to produce a reasonably predictable timeline for the trade war and lay out a clear series of actions moving forward—something that Trump has notoriously struggled with—then capital may inadvertently be deterred from being transferred to American markets.

The Bad (Obvious Drawbacks)

Fortunately, for those who are skeptical about Trump’s approach to international trade, the stakes of this “war” are relatively small. Only a fraction (approx. 7.1%) of all imports from China are even subject to these series of taxes, which is something that the media has largely had the tendency to overlook. Even if the trade war continues to persist until the end of the year, trade between China and the United States may still be even larger in 2018 than it was in 2017.

However, despite the fact that the consequences of this trade war are largely exaggerated, they still should not be willingly ignored. By increasing the cost of manufacturing and exporting steel from China, the costs of manufacturing anything steel-related in the United States will effectively be increased as well. China will certainly not remain idly by and endure the increased cost of manufacturing on their own. Industries in the United States that rely on importing cheap steel to make their goods have already begun to notice the trade war’s negative effects.

Despite being in the heart of what many people refer to as “Trump Country”, a nail factory in the city of Poplar Bluff, Missouri has already claimed that the trade war has caused them to decrease production by approximately 50%. Consequently, other companies that rely on nails coming from this factory may have to increase the cost of their goods as well, and the economic backlash stemming from these tariffs will likely continue to ripple outward.

The Ugly (Worst Case Scenario)

There are ample reasons why an increasingly globalized, free-market world will logically shy away from artificial barriers to trade as time goes on. If the cost of trading with the United States ever becomes too much to endure, trading with a relatively more accessible market (such as the EU) will likely become a more common strategy. Free trade not only helps lower the cost of creating, distributing, and exchanging various goods, it is also the pinnacle of free-market capitalism—something that the Republican Party once took pride in their commitment to defending.

The absolute worst case scenario that could result from this trade war is that it stifles the United States economy and results in a sort of economic isolation. China has already matched the United States in terms of GDP (PPP) and will likely be able to match the GDP (Nominal) levels within the next few decades. If the United States hopes to maintain its status as the world’s foremost economic superpower, then it needs to be willing to open itself to cooperation and the free exchange of goods. By increasing barriers to trade, the United States may lose its ability to project power in Europe, Asia, and much of the developing world. Though the impact of the trade war may be relatively small in a financial sense, it may be the straw that breaks the camel’s back and tarnishes economic relationships around the world.


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Moving Forward

Overall, it seems that Trump’s current trade war is likely something that will only last for a short amount of time and will have a relatively minimal effect on the economy. However, based on what has been witnessed thus far—as well as what can be empirically predicted—this particular set of tariffs is unlikely to increase investment in the American economy and is also unlikely to create the jobs that Trump’s campaign was so relentlessly committed. As time goes on, continuing this trade war and preserving barriers to free trade is something that will likely be continually more difficult to defend.

The largest consequence of this trade war, it seems, will likely be materialized in the 2018 and 2020 elections. As both major parties in the United States continue to deal with increased infighting between seemingly irreconcilable factions, there will exist a significant amount of opportunities for them to either lose or gain momentum. While Trump may be able to say to his already devoted fan base that he “successfully” fulfilled another promise, he may begin to alienate the party’s neo-liberal core that cares far more about free trade than it does about blue-collar conservativism. Similarly, while the Democrats may be able to use the trade war as an argument to appeal to their own neo-liberal branch, they may lose the support of unionists, some environmentalists, and those who stand in opposition to globalism. The potential coalitions and realignment that may form between the parties is certainly something that should not be overlooked.

President Trump Not Stepping Back, New Tariff Thread for China

This move from President Trump could be counted as a countermeasure to China’s decision to raise tariffs about $50 Billion on U.S products. This was also in response to the U.S for applying first, the tariffs.

President Trump stated: “China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology. Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong”

On the other hand, a released statement by China’s Ministry of Commerce on Tuesday saying that China will come back with “qualitative” and “quantitative” measures if the tariffs that President Trump announced really applied.

The statement noted: “Such a practice of extreme pressure and blackmailing deviates from the consensus reached by both sides on multiple occasions, and is a disappointment for the international community”

As far as the market the JPY gained momentum to the upside on Monday morning in Asia session.

That happened after the US President gave some clues about the possibility for introducing new tariffs on the US $200 billion worth of Chinese goods.

Once more Investors probably will stay away in fear of a possible unpredictable volatility that may result in huge losses.

According to investing.com, the dollar index fell about 0.15% to the level of 94.27 at 12:30 and the USDJPY slid about 0.74% to 109.73 after President Trump Annulment about the Tariffs.

This possible trade war now is threading to create more pressure on the Chinese economy. Not only that but possible expansion globally of the treat now looks more real.

Now concerns about liquidity in China started to show by the unexpected move of China’s Central Bank to inject about 200 billion yuan in medium-term funds into their banking system on Tuesday to make sure that they’re going to hold if a full-blown trade war starts. They are probably getting in defensive mode after seen that U.S president Trump not stepping back.

This article was written by Marios Athinodorou, TeleTrade’s market analyst, and commentator. Among others, Marios is delivering weekly trading webinars. Sign up for upcoming webinars here.

BoJ Holds Policy Steady as Inflation Expectations Turn Flat

The central bank maintained its easy monetary policy as it downgraded its outlook on inflation, noting that Japan would be lagging behind the U.S. and the Eurozone which move closer towards tighter monetary policy conditions.

As expected, the Bank of Japan left the short-term interest rates unchanged at -0.10% and maintained its support to keep the 10-year Japanese Government Bond yields around zero percent.

Investors continue to look for clues from the Bank of Japan on how long it would keep its current monetary policy unchanged while price growth continues to remain weak. The BoJ had, in one of its previous policy decisions removed the time frame for achieving the inflation target. This was followed up by the latest meeting where the central bank downgraded its inflation outlook.

The BoJ’s policy sits in stark contrast to that of its peers from the ECB and the Federal Reserve in the U.S. The ECB had previously announced its decision to wind up the QE program by December 2018. Meanwhile, the U.S. Federal Reserve continues to hike interest rates signaling that a fourth-rate hike could be expected this year.

The Fed has also started to unwind the asset purchases that it began in the crisis-era to stimulate the economy.

In its monetary policy statement, the Bank of Japan noted that consumer prices were in subdued, staying in a range of 0.5% – 1.0%. This was seen to be dovish considering that the central bank had previously noted that consumer prices were around 1.0%.

The central bank remained cautious in its assessment of reaching the 2% inflation target rate. It said that inflation expectations continued to remain flat.

The central bank also maintained its view on the economy noting that the economy was expanding at a moderate pace. Officials were unfazed by the weak economic report that came out for the first quarter. Officials blamed the first quarter contraction on the economy on temporary factors and expect growth to pick up towards the second quarter of the year.

Japan’s economy in the first three months of the year had contracted 0.6%, putting an end to an impressive quarter over quarter growth. Despite the declines, many economists argue that growth could bounce back in the second quarter driven by higher exports and increased capital expenditure.

The slow pace of exit from its crisis-era policy puts the Bank of Japan in a tight spot with not much of policy tools left in case of another downturn in the economy, contrary to the policy decisions made by the ECB and the Fed.

Previously, growth in Japan was led by an increase in global exports which continued to underpin an uptick in growth in the global economy.

Consumer prices in Japan increased 0.7% in April on an annualized basis. This was a second consecutive month of a slowdown in price pressures which cast questions on the BoJ’s ability to guide the economy through a recovery.

With inflation staying weak, BoJ officials are likely to look more closely on the structural factors that could be seen holding growth back.

Besides the apparent weakness, the U.S. trade policies under the Trump administration are also expected to hit growth globally. President Trump had threatened to impose tariffs on automobile imports which could hit Japan’s exports.

Recently, the International Monetary Fund had cautioned that Trump’s import tariffs could undermine the global economy resulting in retaliatory moves by other nations which could in turn damage the U.S. economy.

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Gold is Handed a Trump Card…

Anyone paying attention to the news recently will be aware of Donald Trump’s (some say) ingenious plan to impose global trade tariffs to promote US jobs and business under his “America First” banner.

Amongst the doom and gloom that followed the announcement that he was actually going to go through with it – and the horror when it came to fruition – was a collective sigh of relief from gold bugs.

As is well known, uncertainty in the markets has always been a winner for gold. A crisis of any magnitude – especially a sustained one – is a great boost for the yellow metal.

This has to be tempered with the recent developments in Singapore. The meeting between Donald Trump and Kim Jong Un – with the resultant lifting of sanctions, the scrapping of nuclear weapons, and the cessation of exercises in the South China Sea with South Korea – means that a raft of uncertainty has been eliminated. This is good for trade and world peace – but not necessarily for gold!

Taking a look at the weekly chart of gold it can be seen that throughout the remainder of the year – and forward into 2019 – gold is reaching a crucial point at the crossing of the high and low trendlines.

Gold Weekly Chart
Gold Weekly Chart

Despite the recent fall in the gold price, the trend is towards higher lows – the usual mark of an uptrend. This is a massive comfort long-term and looking at the chart right now can be seen as an obvious buying opportunity going forward.

The higher lows are quite prominent on the trendline, at 2) and in the lower highs at the trendline of 1). This chart goes back to January 2016, and clearly shows that gold has been caught in this wedge for a couple of years now.

At any point on our made-up scenario (in orange at the point of the wedge) Gold could surprise and breakthrough the trendlines to rally or fall accordingly. It is difficult to predict. If you look at the fall of December 2016 (to the left of 2) on the lower trendline) You will see that although it fell briefly below the line it quickly recovered to rally back to the $1260 level.

The EMA (exponential moving average) lines on the chart are now mirroring the signals of an uptrend with the 21-day EMA on top, and the 55-day, 100-day, and 200-day lines – in that order – below them. This is a complete reversal of the order of these lines at the beginning of January 2016.

For those who want to find out more about technical analysis, an excellent, informative, in-depth, explanation of moving averages and the way they relate to charts will find this article is very useful – if a little technical for beginners.

It is all too easy to follow the daily, four hourly, hourly, and lower timeframes on charts and to become paranoid about the slightest rise or fall in the price. Looking at the weekly and monthly charts, Together with the moving averages, puts some perspective into the price movements and enables a more objective view of the market and what it is likely to do.

As you can see from this chart the medium-term future of gold shows an upward trend – It simply remains to be seen how the long-term trend pans out as the wedge bites.

We see this point in time as an opportunity to buy into gold and build an allocation ready for the next rise. We remain bullish on gold in both the medium and long-term.

Noble Gold specializes in IRAs and 401(k) rollovers through precious metals and cryptocurrencies investments.

Global Stocks Rise as Progress Made in Singapore Between Trump and Kim

It is not yet known what progress has been made on denuclearisation, with a press conference scheduled for 06:30 GMT. USDJPY advanced higher to 110.490 overnight with support at 110.125. Markets are positioning ahead of tomorrow’s FOMC and Thursday’s ECB meetings when volatility should pick up.

Markets were in a risk on mode yesterday with Stock markets higher following the G7 summit. The gains were small at the beginning of a busy week for markets. The FX markets painted a different story as USDCAD rose to the 1.30000 level with Canadian PM Trudeau saying that they are preparing retaliatory measures as the relationship between the allies breaks down. The USD strengthened as the G7 passed much as expected to postpone the worst fears of the market.


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UK Industrial Production (YoY) (Apr) was 1.8% against an expected 2.7% from a previous 2.9%. Industrial Production (MoM) (Apr) was -0.8% against an expected 0.2% from 0.1% previously. Last month this data was flat but it disappointed expectations and missed by around 1%. Manufacturing Production (YoY) (Apr) was 1.4% against an expected 3.1% from 2.9% previously. Manufacturing Production (MoM) (Apr) was -1.4% against an expected 0.3% from -0.1% previously. This figure has missed expectations and fallen under the zero mark showing a contraction on the monthly number. The negative impact from Brexit is continuing to plague the economy as orders are delayed and production postponed. GBPUSD fell from 1.34274 to 1.33602 pairs can move because of this data release.

  • EURUSD is down -0.11% overnight, trading aroun1.17689.
  • USDJPY is up 0.24in the early session, trading at around 110.302
  • GBPUSD is down -0.07% this morning trading around 1.33639
  • Gold is down –0.21% in early morning trading at around $1,297.70
  • WTI is up 0.15% this morning, trading around $66.16

This article was written by FxPro