Stock markets have continued to get pulled around by political headlines, with European stocks sliding to two-week lows on a combination of concerns about impeachment proceedings against the US president, as well as a harder trade line with respect to a China trade deal.

The pound also came under pressure as parliament returned from the prorogation that never was, and pretty much picked up where it left off, with MPs giving full vent to a range of emotions, some of them quite ugly. If last night’s events are a guide, getting consensus for any kind of deal is going to be a very big ask, and will probably be impossible without a change of MPs, as both Labour and Conservative Party MPs traded insults, with Prime Minister Johnson goading Labour leader Jeremy Corbyn into calling a vote of no confidence in his government.

What does seem clear is that an election is coming, the only question appears to be when and how.

US stock markets got off to a disappointing start, opening lower over concerns about the contents of a memo which outlined President Trump’s controversial phone call he had with Ukraine President Zelensky.

During the call was claimed the US President pressured the Ukrainian President to conduct a probe into the Ukrainian business dealings of Hunter Biden, the son of prospective Democratic Presidential candidate Joe Biden. The release of a memo which outlined the main details of the conversation, while embarrassing for the President seemed to come up short of a proverbial smoking gun.

This helped US markets find a bit of a base, before they received a lift from comments by the US President that suggested that a US, China trade deal could come sooner than expected, pulling back to close in positive territory. The rebound was also helped by reports that Japan and the US have reached an initial agreement on trade, which in turn saw US treasuries and gold prices sell off sharply, sending yields sharply higher.

The capacity for these types of remarks, from the President and his officials, to prompt sustainable types of rebound is losing its capacity to endure however given that we’ve heard them so many times before, only to be disappointed.

As such European markets look set to open lower as the rebound lost its momentum on scepticism that the President would be able to deliver any sort of speedy result.

In other Europe related news, German ECB member Sabine Lautenschlaeger, surprised quite a few people by suddenly resigning from her position as a board member. Known for her more hawkish views it is hard not to see this as a critique of the recent new stimulus package announced by the European Central Bank. She is also the third German member of the ECB to walk away early in a sign of the unease amongst certain members in the governing council about how successful any new measures are likely to be, in the absence of fiscal reform. She will leave on 31st October, the same day as ECB President Mario Draghi, and just before Christine Lagarde comes into replace him.

This might open up a spot for a more dovish member to replace her, which could make any further attempts to ease policy a little easier, further down the line. With ECB President Mario Draghi due to speak later today we might get further details behind her resignation.

On the data front we’ll be getting sight of the final Q2 US GDP numbers and weekly jobless claims. Neither is expected to move the dial that much with US Q2 GDP expected to be confirmed at 2%, while weekly jobless claims are expected to rise to 210k.

EURUSD – looks set for another test of 1.0920, with a break below targeting a move towards the 1.0800 area. We still have trend line resistance at 1.1070, from the June peaks at 1.1412, with further resistance at the 50-day MA just above.

GBPUSD – slipped below the 1.2380 level yesterday raising the prospect that we might see further losses towards the 1.2280 area, and 50-day MA. If we can hold above 1.2280 then a move back to 1.2500 is possible.

EURGBP – found support at the 0.8785/95 level last week, which is the 61.8% retracement of the entire 0.8475/ 0.9325 up move. We could squeeze back to the 0.8900 area where we have resistance. A break below 0.8780 opens up 0.8720.

USDJPY – rebounded off the 50-day MA at 107.00, which could see a return to the 108.50 previous highs. A move below the 107.00 level opens up the prospect of a move towards 106.00. 


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