There’s been some selling seen in sterling ahead of the return of MPs, with the pound drifting lower against all its major peers.
To put the decline in context they are relatively small with the largest drop seen against the US dollar and Swiss Franc and only amounting to around half a percent. There’s not really any negative news to support this pullback, with Jeremy Corbyn remaining coy on the timing of his no-confidence motion probably a shrewd move as he is not falling into a possible trap and risking opening the door to a no-deal exit once more.
Rather, the weakness can likely be attributed to a retracement after what has been a strong push higher and perhaps traders are getting just a little bit cautious on the pound as we await the next move from the PM. In the same way that the decision to prorogue effectively sped up the response by the opposition, the return of parliament could move things forward more quickly and with the government’s next move far from certain some paring of the recent gains in the pound is not too surprising.
Trump impeachment odds soar
According to a popular betting website the probability of Trump being impeached have increased dramatically with the odds on Predictit rising as high as $0.62 on the dollar - implying a probability of around 62%. Last night, Nancy Pelosi announced the house would initiate a formal impeachment inquiry against the president, with Trump charged with threatening national security by seeking to enlist Ukraine to dig up dirt on political rival, Democrat Joe Biden.
It should be pointed out that while bookmakers odds can provide some insight into the probability of an event, they are also continuously attempting to manage their exposure and therefore it is not unusual for odds to come in sharply if large wagers start to get placed.
Only 3 previous presidents have faced impeachment charges, with Andrew Johnson and Bill Clinton both impeached but later acquitted by the Senate while Rchard Nixon resigned when facing the House impeachment vote. Given that the Republicans currently hold the Senate with 53 seats and a supermajority of 2/3rds or 67 seats are needed to convict the aforementioned odds look extremely short and the base case in our opinion is that this would fail at that hurdle even if it gets that far. That’s not to say the whole process is a futile endeavour however, with the aim clearly to discredit Trump ahead of next year’s election and raise doubts as to his America first approach that he is so keen to trumpet.
At present the market doesn’t seem overly sensitive to the downside for developments on this front, with the sharpest move yesterday actually pop higher in US stocks when Trump announced he would release a manuscript of the phone call that is at the centre of the alleged wrongdoing. However, traders were quick to realise that this would amount to little more than his word of the events and the markets swiftly reverse.