US equities were again hit hard yesterday as Wall Street suffered its worst day in over 8-months on the back of political instability in the USA. We are seeing the so-called Trump trade, in which equities and the USD climbed for months on the promise of Trump being good for business while also promising to adopt a less regulate rive stance on banks. The bullishness has disappeared and we are seeing profit taking on the recent moves which saw record highs being posted. The reason for the doubt is the recent accusation and subsequently setting up of an independent review board to look into allegations that Trump and/or the Trump administration colluded with Russia in rigging the US elections. Former FBI director Robert Muller has been named Special prosecutor of the Russia Probe and market are expecting tax and other reforms to take a back seat as the white house deals with this. Equities will remain under pressure as traders trod cautiously, quickly dumping equities if the political instability intensifies.

The USD has also taken a hit, with futures now pricing in only a 65% chance of a June rate hike, down from 87% last week, as traders price in the new uncertainty, driving the USD index, a measure of the strength of the USD against a basket of currencies, below 98. The JPY has been the big gainer due to its safe haven qualities, gaining an impressive 250 pips against the USD in yesterday’s trade. The EUR was just behind as we saw the EURUSD gain 250 pips this week. The USD will remain subdued, so long as the instability continues. On the bright side, we have a few fundamental releases expected today, which could turn the fate of the currency if better than expected.

In commodities, crude oil remained range bound below $49 as all eyes turn to next week’s OPEC meeting and look for any jawboning from oil producing nations regarding output and now also the impact of the US political concerns and its impact on the demand for oil.

Gold thrived on the back of the uncertainty with buyers making short work of the 1250 level to test as high as 1262 before profit taking saw the precious metal retreat. Bulls will look to keep above the 1250 mark as they look to retest 1275 and beyond, should we see further political instability or a decline in the USD.