EUR/USD, GBP/USD Forecasts Amid US & UK Political Turmoil: Coming up in our podcast this time:
- How will the Trump impeachment process affect forex and US stocks?
- EUR/USD and GBP/USD: Could the US Dollar fall?
- Brexit latest: How to trade the Pound
This time on Trading Global Markets Decoded, our host Martin Essex is joined by Rupert Osborne, CEO of the US arm of DailyFX parent company IG. Key topics covered: the Trump impeachment process and how it might hit the markets, the latest EUR/USD, GBP/USD forecasts, and a Brexit update. You can listen to this podcast with Rupert Osborne by clicking on the link above or one of the alternative platforms listed below.
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Trump Impeachment process – how will it affect the markets?
Talk begins on the Trump impeachment process. Can we draw on the Nixon impeachment for clues on what might happen? Rupert says that while comparisons can be made to the 1970s, differing financial markets between the two eras mean there aren’t too many parallels for forex.
“The stock market did fall at that time, and political instability in the largest economy in the world would probably be received poorly by the financial markets.,” Rupert says. However, it’s unclear whether the Democrats have a powerful enough case against Trump for conviction. “While the chances of him being impeached by the House may be quite high, the chances of him being convicted in the Senate are probably quite low.”
EUR/USD and GBP/USD:Could USD and stocks both fall?
When it comes to EUR/USD and GBP/USD, Rupert cites a study that predicts we’re at the end of a 15-year cycle that may see a period where both the US stock market and the US Dollar fall. “If USD goes up you would expect US stocks to go down, and vice versa, but the hypothesis is this would break and both would fall, which would have an impact on investor habits,” he says.
Could the Dollar’s role as safe haven be under threat? “USD is the central currency for international trade, and many assets are held in USD.
“The role of the Fed in stabilizing the global financial markets is high too, so for the foreseeable future, people will default back to the Dollar as a safe haven currency.”
Brexit latest and GBP
At this stage of Brexit negotiations, Rupert feels the central case is a No Deal exit, probably leading to an election. What does that mean for trading GBP?
“It would be sensible for everyone looking at the market to balance out risk and reward and sketch out what you think may happen,” he says. “If you believe the Pound is undervalued and take a bullish view, think about how far down the market can move, and make sure you’re fully collateralized up to that point.
“If you take a bearish view on the Pound you should set your risk/reward such that you would be able to capture sudden falls and protect yourself on the upside.”
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