US Dollar Bounces Back as Investors Watch Out for Trump’s Policies
Global market participants still find themselves in a dazed situation after witnessing the rollercoaster ride that played out yesterday. Financial markets witnessed wild swings after the US Republican candidate, Donald Trump, won the country’s presidential election. However, surprisingly, the financial markets stabilised and regained momentum as investors made a much more sober assessment of the whole situation. The 70-year-old real estate developer in his victory speech, vowed to unite the country and “be President for all Americans”. Over the next several weeks, market participants will try to figure out how President Trump’s policies differ from candidate Trump’s rhetoric.
Meanwhile, investor focus now shifts back to incoming economic data points. In the UK, the Royal Institution of Chartered Surveyors (RICS) showed that UK house prices surged in October. In the US, weekly jobless claims data is up for release later today.
Pound Sterling – UK Markets
The Pound is trading mixed against the US Dollar and the Euro this morning. Earlier in the session, the latest survey from RICS showed that British house prices surged in October, registering its fastest pace of growth since April 2016, with demand for residential properties rising for the second consecutive month. With no further economic releases scheduled in the UK today, investors look forward to the nation’s construction output data for September due tomorrow.
The Pound witnessed a wild ride yesterday, triggered by the surprising victory of Donald Trump in the US presidential election. Sterling shot up against the greenback in the immediate aftermath of the news but then retracted and gave up some of these gains as the day progressed. On the data front, Britain’s goods trade deficit widened in September. Separately, the European Union Commission (EU), in its Autumn 2016 Economic Forecast, sharply downgraded UK’s growth forecast for 2017, as it expects business investment, income and spending to slow following the country’s vote to leave the European Union.
US Dollar – US Markets
The US Dollar rebounded against most of its major peers yesterday, as investors digested Donald Trump’s unexpected win in the Presidential election. Fear and shock were expressed after the Republican Donald Trump was elected as the President after months of bad-mouthing his rival. Donald Trump’s win over Hillary Clinton in the election places eight years of higher-education reform under President Barack Obama in doubt, raising questions about the direction of policies governing financial aid and for-profit colleges. In other economic news, US MBA mortgage applications declined for the third consecutive week, reaching a six-month low. Meanwhile, wholesale inventories advanced less than expected in September.
The greenback is trading on a stronger footing against the Pound and the common currency this morning, as investors assess Donald Trump’s foreign policy plans. Later today, market participants will focus on US weekly initial jobless claims data for further cues in the US Dollar.
Euro – European Markets
The shared currency is trading lower against the US Dollar and the Pound this morning. Data released earlier in the session showed that French industrial production contracted faster than expected in September from August. On the other hand, Italian industrial output fell less than anticipated in September. In other economic news, preliminary estimates showed that French non-farm payrolls advanced during the third quarter of this year. Going ahead, market participants look forward to the final reading of German consumer price index, scheduled to release tomorrow.
Yesterday, the Euro ended lower against its major peers. Separately, the European Commission in its Autumn 2016 Economic Forecast, cut the Euro zone’s growth forecast to 1.7% in 2016, compared to 1.6% in its previous forecast and 1.5% in 2017, down from 1.8% in its May estimates. The commission cited increased political uncertainty, including Britain's Brexit vote, and weakening global trade for the downgrade.
Other Currencies – Highlights
The Kiwi Dollar has surged against the greenback earlier in the session, after the Reserve Bank of New Zealand (RBNZ) slashed benchmark interest rate to a new all-time low of 1.75%. However, it pared some of the gains later as the rate cut was already priced in by market participants. At the post-meeting speech, the central bank Governor, Graeme Wheeler, made it clear that policymakers remain worried about numerous uncertainties, particularly relating to international outlook, and thus monetary policy might need to be adjusted accordingly. New Zealand’s inflation rate has been languishing below the RBNZ’s 1.0-3.0% target band for two years now. Nevertheless, the nation’s dairy prices have risen and unemployment rate has dropped to its lowest level in almost eight years.
Separately, investors are eager to find out how the newly elected US President, Donald Trump will govern the nation. New Zealand’s commodity based economy, which is highly reliant on trade, will be adversely affected if global trade agreements are uprooted by the Trump administration.