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Volatility and risk aversion kicked into high gear but the U.S. dollar failed to benefit as the spotlight is still on Trump’s intelligence information leak to Russia.

  • U.S. Justice Dept ordered an investigation on intelligence leak to Russia
  • Former FBI Director Mueller to oversee Trump-Russia probe
  • U.S. equity indices chalk up steepest one-day losses so far this year
  • Canadian manufacturing sales up 1.0% versus 1.1% forecast
  • U.S. crude oil inventories down 1.8M barrels vs. projected 2.5M decline

Major Events:

The latest on “Trumpgate”

Grab your popcorn, forex fellas, because the drama in Washington has just gotten more exciting. In the latest turn of events, the U.S. Justice Department ordered an official investigation on Trump’s alleged intelligence information leak to Russia and appointed former FBI Director Mueller to lead the probe.

Although House Speaker Paul Ryan attempted to reassure the public in saying that Congress will continue to work on fiscal policy reforms even with the ongoing controversy in the administration, these remarks fell on deaf ears as political headlines overshadowed economic expectations once more.

Apart from growing doubts that the current administration can still push its tax reform agenda forward, market participants also seem to be entertaining the idea of a Trump impeachment (Trumpeachment? Trexit?) and the additional instability it could bring to the global economy.

The volatility index (VIX), which is considered a gauge of fear and uncertainty in the markets, jumped 46.38% to 15.59. That’s its biggest one-day surge since the EU referendum! U.S. equities also had their worst day so far this year:

  • Dow 30 index is down 372.85 points (-1.78%)
  • S&P 500 index is down 43.64 points (-1.82%)
  • Nasdaq is down 158.63 points (-2.57%)

A couple of green shoots for Canada

While all the market ruckus was focused on the goings-on in Washington, a couple of medium-tier reports turned out relatively well for the Canadian economy.

In particular, Canadian manufacturing sales advanced 1.0% in March, slightly lower compared to the 1.1% consensus but still a recovery from the downgraded 0.6% decline in the previous month. Components indicated that the gains were mostly spurred by higher sales in the transportation equipment and food industries.

Also, the Energy Information Administration reported a draw of 1.8 million barrels in stockpiles. This is smaller than the projected reduction of 2.5 million barrels but still enough to ease oversupply concerns for the time being while traders keep their hopes up for a 9-month extension of the OPEC output deal.

Major Market Movers:

JPY

The Japanese yen was the biggest beneficiary of the latest batch of safe-haven flows since the Greenback was weighed down by “Trumpgate” while the franc paused from its climb after SNB head Jordan jawboned the currency.

USD/JPY slipped from a high of 112.52 to a low of 110.53 (-1.77%), EUR/JPY dropped from 124.94 to a low of 123.41 (-1.22%), GBP/JPY is down from 145.92 to the 144.00 area (-1.32%), and AUD/JPY fell from 83.32 to 82.34 (-1.18%).

Watch Out For:

  • 12:50 am GMT: Japanese preliminary GDP q/q (0.4% expected, 0.3% previous)
  • 2:00 am GMT: Australia MI inflation expectations
  • 2:30 am GMT: Australian employment change (4.5K expected, 60.9K previous)
  • 2:30 am GMT: Australian unemployment rate (no change from 5.9% expected)