It seemed very unlikely that global political uncertainties would rekindle so fast after the French election, in which the second round between Emmanuel Macron and Marine Le Pen was a non-event.
Yet, as often in financial markets, uncertainties are coming from where it was not really expected. And those uncertainties are now coming from the US and more precisely, from the Oval Office.
The President Trump issue regarding the FBI investigation are weighing on credibility while rumours are growing that an impeachment procedure may at some point take place. Yet, we remain suspicious of that at this point but can see the dollar is getting weaker. This year was expected to be calmer for financial markets, but it may yet be complicated for Western countries.
On top of that, the equity markets had their worst day yesterday since Brexit. The S&P lost almost 44 points. This also supports the bearish move on the dollar. Anyway our view remains the same as we believe the economy is underestimated. We now consider that we are still at the start of a risk-off move and that gold is set to to strengthen further.
By Yann Quelenn