European markets have opened a little softer on Wednesday, as the President of the US faces impeachment proceedings and the Prime Minister of the UK calls to resign.
It’s not been a great 24 hours for the leaders of two of the world’s most important economies and old allies. While both would rather be exploring an ambitious new post-Brexit trade deal that will bring the two countries even closer together, they’re instead now fighting opposition forces at home intent on bringing them down.
While Boris’ defeat in the Supreme Court on Tuesday – which led to calls for his resignation – was largely welcomed by markets as it makes delivering no-deal on 31 October that much more challenging, the impeachment announcement against Donald Trump was not so well received.
Everyone is naturally now speculating on how Trump responds to the impeachment proceedings but it still seems highly unlikely that the Senate backs it even if the House does. But perhaps that’s not the Democrats ultimate aim, with the proximity to next year’s election not likely a fortunate coincidence.
Gold buoyed by impeachment
Gold extended its run higher on the back of the impeachment announcement, buoyed by a softer dollar and broader risk-aversion. The yellow metal is continuing to find resistance though around the early August highs, a level which it will need to break in order to knock the gold bears and regain some upward momentum. A failure to break above this level could further encourage sellers and pile pressure back on $1,480.
Oil edging back to pre-attack levels
Oil prices are gradually returning to pre-Saudi attack levels as the traders welcome the period of calm that has followed the events of just over a week ago. The risk of retaliation was high at the time but it’s clear that a more measured and calm approach has been taken, despite numerous countries now joining the US in blaming Iran.
We’re still seeing some risk premium being priced in as the facilities aren’t fully back online and they’re clearly vulnerable, but with Brent only 3.5% above a week last Friday’s close, this is far more modest and may be gradually reduced in the coming days and weeks.
