Wed, Oct 05, 2022 @ 15:53 GMT
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Investors Shaking Off Trump Concerns And Focused On Jackson Hole | Oil And Euro Lower

Markets move forward and it shows no concerns about Trump
US Government shutdown anxiety would resurface
Oil facing selling pressure due to inventory data
Euro lower against the dollar but up against Sterling

European markets have shaken off the anxieties of the US dysfunction and the focus has turned towards the Jackson Hole meeting. However, the days of Trump enacting his fiscal agenda are still looking darker. August is almost over and September could be the month of heightened volatility given the issues on hand.

Investors would remain highly sensitive to any new headlines around the US government shut down due to the debt ceiling hitting its boundary. This time the danger is real because the commander in chief is a completely unpredictable person and he has a capability to do anything. Traders are not responding positively to the US President’s threats of shutting down the government.

He is using one of his tricks to get what he wants and does not seem to care about what could be the consequence of the US shutdown for the economy. The influence of such an event expands well beyond the US borders because it delivers the message that the country is not united. The investment community would respond even more adversely to that message. One can also say that such an event would leave its scar on the US debt ratings.

What matters the most for Mr Trump is to build the wall which he promised throughout his campaign. He seems to be determined on that in order to win more support of Americans and doesn’t care about the message it delivers for the broader investment community.

Trump and his tweets would remain the focal point amid investors and a more adverse development could lead to a further collapse in the investor sentiment. He inserted another dose of uncertainty yesterday by menacing to pull out of NAFTA. Countries such as Canada and Mexico are leaving no stone unturned to make the agreement work. Basically, President Trump has up the ante on the tumultuous month which is full with tensions ranging from the geopolitics to shutting down the government.

The yellow metal is still struggling to move closer to the 1300 mark due to the dollar strength. An essential bullish signal would be if the price breaks the 1300 mark otherwise you can say that the uptrend has no energy. Janet Yellen could surprise the market with a less dovish approach however stagnant inflation should keep her in check. The reality is that you cannot fight the Fed or predict their action accurately every single time. The US new home sales data was underwhelming and this is the direct result of the higher interest rates. The focus will be on the existing new home sales and if we get the same message here, it would push the dollar lower and therefore the gold price could be vulnerable.

The oil price is still suffering from the crude inventory data print. Despite the fact that the headline number did show an inventory drawdown, investors are paying more attention to the fact that the drawdown was less deep as compared to the previous number and this is creating the selling pressure for the oil price.

The Euro didn’t get much help from Mario Draghi’s speech yesterday as it was carefully and colourlessly designed. Traders are hoping that they may get some juicy sauce during his speech. This could help them to see the internal frame work of the ECB’s strategy as the bank is planning on to reduce its support for the market by curtailing its monthly purchase program.

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