The G20 summit took place in Bali, Indonesia, on November 2022…
Trump, impeachment, USD
Information is not investment advice
The USD’s reaction
On January 6, people rioting out there in the streets in support of Donald Trump broke into the US Capitol. That event didn’t come out of the blue, but still, it was very strong. It made EUR/USD slump from 1.2350 to 1.2130 during the next couple of days – that’s very clear on the chart below.
Mirrored on the other side of the Forex spectrum, USD/JPY rose from 102.60 to 104.00 from January 6 to January 8 in response to the same events. What’s the logic? Investors got emotional and demanded more dollars to back up their funds. Pretty usual: destiny strikes – dollar rises as a safe-haven currency.
Therefore, seeing the USD gain so much value in such a short period, we should assume the same scenario may repeat quite soon in the future. Or not? The thing is, the House of Representatives confirmed it wants to impeach Donald Trump. What are the next steps now?
The short-term future
If Trump gets convicted for supporting the riots of January 6, that will be quite an impact on the USD. A push, more specifically. At least, because that would be a first-of-the-kind event for the US. The USD will probably gain more on that, if that happens. In this scenario, EUR/USD may drop to 1.20, USD/JPY leap to 105.00, and other pairs may make similarly strong moves in the direction similar to the one they’ve had in response to the riots of January 6. Therefore, watch the news, and prepare your positions. Now, here comes the dark side – the fundamental side.
The long-term future
Impeachment is a procedure that makes presidents leave the office before their term ends if they behaved badly. Donald Trump may have behaved badly, but his term ends in a week anyway. The Senate (which needs to vote for impeachment, too, if it is to be concluded) will not be considering the case before that. So, by the time the next stage of impeachment starts, Donald Trump will be already gone. What’s the point? Formally, not to let Trump be re-elected – ever again. Also, to strip some of the ex-president privileges off him. And that requires the Senate to go all the way to the end with the required majority numbers during the prescribed voting process.
In general, unless there is some specific plan designed by someone behind all that (which we are not suggesting: conspiracies are no longer in fashion), what’s happening now is just emotional chaos in the circles around Donald Trump. In fact, it’s pretty much like his entire term in the office: sometimes impulsive, sometimes emotional. Not only referring to him but around him as well. Maybe, some people just got too much of Trump. Maybe, even his end of term isn’t a reason enough for them to leave him alone for just another week and see him go. In any case, that’s not the point.
More importantly, he is a charismatic leader who has a big chunk of American society supporting him. He lost the 2020 election, so he will go. Where will his supporters go then? Those who were storming the Capitol? They will need direction to channel their social energy, and they will find one. Not necessarily Donald Trump, whether he chooses to continue political life and public influencing or not, whatever it may be. The point is that there is quite a big schism in American society, and it’s deep enough to make one part of that society break into the house of the highest authorities in the country. That means there is a social process that led to this. This process will either propel further to make the social counter-standing ever bigger or it will be pacified and re-directed somewhere to gradually lose power. That’s the field of action for Joe Biden. Instead of making America great again, he needs to make it whole again. If he fails, things more serious than just street activists breaking into the Capitol may happen.
However, let’s not dig too much into “dark prophecies”. So far, all that is merely a speculation, isn’t it? Therefore, watch EUR/USD and USD/JPY. The former may drop to 1.20, and the latter may rise to 105.00 if Donald Trump is convicted – let’s stick to that.
The deafening news shocked the whole world yesterday: the British Queen Elizabeth II died peacefully at the age of 96…
After months of pressure from the White House, Saudi Arabia relented and agreed with other OPEC+ members to increase production.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates? Recall that the Federal Open Market Committee had previously ended the year 2022 with a 50bps hike, and an indication from Powell, the committee chairman, that the Fed could consider raising interest rates by 75bps in the course of the year 2023.
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.