Risk Off Mode Amid Investors While Trump Engulfed In Turmoil

Risk Off Mode Amid Investors While Trump Engulfed In Turmoil

Today is a risk off trade for investors as Mr Trump is badly engulfed by political turmoil. This has pushed the demand for safe haven and we are seeing increasing interest for the yellow metal. What investors are worried about is that the impeachment could take place over in the US as the odds are showing more than 50 percent for such an event after the New York Times released its article. If such scenario does become a reality, we could literally say good bye to Trump's reflation trade. The US stock futures moved sharply lower last night and we have experienced a big spike in the gold price due to the impeachment anxieties. The European futures are also tracking Asian markets and looking for safety is a major play today until the dust settles.

The rally in the euro-dollar is something which everyone is talking about. There are more bulls in the market when it comes to the Euro. We think that the dollar weakens will continue to provide a lot of tail wind for this rally and the euro-dollar could easily touch the level of 1.12 soon. A lot of dollar weakness is primarily due to the reason that traders have become sanguine about the Trump's ability to deliver on his promises. He is involved in way too many thorny issues and not many believe that he is going to get his most important task done any time soon. Yes, we are talking about tax reforms and infrastructure spending. They look in jeopardy.

Moreover, the economic data out of the Eurozone is also helping the euro currency. Traders cannot deny that the ECB is going to start preparing the market that the tapering of their quantitative easing program would become a reality soon. Therefore, investors are going to position themselves ahead of this event, and it is on the basis of this thesis, we believe that the path of the least resistance for the Euro against the dollar is skewed to the upside.

The EU has said that they would keep all the Brexit negotiations public which is not what Theresa May wants. This would bring more turmoil for the UK's economy as more and more negative news would become public and investors would be able to see how weak her position is during the negotiation process. A large number of investment firms have announced their back up plans so far, and there are no signs of stopping this news yet which would have an impact on the london market.

© Scoop Media