Connect with us

Hi, what are you looking for?

Opinion

Markets Set to Ignore Impeachment Noise Again

By Han Tan, Market Analyst at FXTM

Former US President Donald Trump’s second impeachment trial in the Senate has just been given the green light to proceed and opening arguments are set for noon Eastern time on Wednesday. Trump’s chances of being acquitted are high, considering that the Senate must have a two-thirds majority or 67 votes to find the former president guilty. In other words, Democrats would require at least 17 Republicans to vote to convict Trump, which is a tall order, to say the least.

The good news for markets is that lawmakers on both sides are hoping for a swift trial. Republicans want to limit the political fallout, while Democrats hope to quickly move on rolling out President Joe Biden’s policy agenda. The shorter timeframe for Trump’s second impeachment trial would mitigate the risk of political noise disrupting the risk-on environment in global financial markets.

At the time of writing, futures contracts for the S&P 500 are edging higher in an attempt to erase Tuesday’s declines. Asian stock markets are mostly higher, the dollar is little changed, and gold is edging upwards.

Markets continue to pin hopes on fiscal stimulus rollout

Global investors are likely to ignore any political drama emanating from the Senate during this trial unless it has repercussions on the progress of the next round of US fiscal stimulus.

President Biden’s $1.9 trillion proposal faces dilution risks, even as he extends his hand across the political divide in a bid to obtain bipartisan agreement. Yet markets appear more concerned about the timing of its rollout rather than the headline figure, hoping it will arrive sooner rather than later.

Should this show of partisanship in the Senate amid the impeachment trial bleed over into fiscal stimulus talks and delay its rollout, that could trip up risk-taking activities in the markets.

In focus: Powell’s speech, US January inflation

The reflation narrative in the markets will have one eye on Fed Chair Jerome Powell’s speech, as well as today’s release of the US January CPI figures. Investors are already trying to pre-empt when the US economy will experience the inflation overshoot that’s expected to be driven by more incoming fiscal stimulus. Such conditions might trigger the much talked about Fed tapering, which may then pave the way for higher interest rates. More clues about that timeline would help global investors ascertain their allocations in equities versus bonds.

Powell may attempt to bat down bond yields once more after the 10-year Treasury yield touched the psychologically important 1.20% mark earlier this week. Such comments would push the dollar index (DXY) lower while lifting gold prices.

However, should the January inflation data show another month of tepid price pressures as forecast, that would dampen bullion demand while offering support for the DXY.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Advertisement

advert
ad

You May Also Like

News

Lagos State Police command has confirmed that the abducted Managing Director of Fouani Company and three other brothers and boat captain have been rescued....

Sports

Spanish club, Sevilla have agreed on a deal to sign Super Eagles forward Chidera Ejuke. The 26-year-old has a verbal agreement to join Sevilla...

News

Israeli Prime Minister Benjamin Netanyahu has announced the end of Israel’s six-member war cabinet. The Israeli leader had announced the decision at a meeting...

News

In celebration of Father’s Day, QNET, a leading global e-commerce company, reaffirms its dedication to empowering dads around the world with business opportunities and...