The Forex Week In Review
Forex markets this week saw huge volatility in response to the US elections. In echoes of the Brexit situation, book makers and poll makers were caught offside as the favourite, Hilary Clinton, lost to maverick Republican candidate Donald Trump.
Whilst the initial market response saw severe selling in equities and the US Dollar, moves were quickly unwound the following day with the S&P trading back above the pre-result levels and the US Dollar similarly adding fresh gains.
Markets initial concerns regarding the extremity of Trump’s proposed policies and the likely economic damage they would cause have been tempered as it appears, initially, that Trump has moderated his attitude. The commodity complex has derived significant support based on Trump’s proposals of huge increases in infrastructure spending which have seen speculators heavily buying industrial metals.
For now it seems as though markets have re adjusting and are responding robustly to Trump’s election which could see the Fed remain on course to raise rates in 2016.
USD Despite initial weakness, USD gained in response to the election of Donald Trump as President. The prospect of increased consumer spending, lower corporate taxes and a more friendly business environment should support a positive shift in the economic outlook among firms. With risk sentiment responding positively, fed rate hike expectations for December remain intact.
EUR The Euro fell in response to the US Presidential result as risk sentiment surged. On the release front, German Industrial Production disappointed the markets with a decline of 1.8 percent, well short of the forecast of -0.4 percent. While Germany’s surplus narrowed to EUR 21.3 billion, missing the forecast of EUR 23.4 billion
GBP On the release front, German Industrial Production disappointed the markets with a decline of 1.8 percent, well short of the forecast of -0.4 percent. While Germany’s surplus narrowed to EUR 21.3 billion, missing the forecast of EUR 23.4 billion. Business sentiment recovered from post-referendum fall but remained relatively fragile alongside significant uncertainty around the longer-term outlook, Bank of England said. The central bank also commented that investment intentions indicate “broadly stable or slightly lower” spending in the coming year.
JPY Survey by eco watchers showed that Japanese households and businesses were expecting economic momentum to pick up steam. The gauge of expectation in the next few months climbed from 48.5 in September to 49.0 in October. On a separate survey, households were the most optimistic about current economic situation since January. The index climbed from 44.8 in September to 46.2 in October despite broadly subdued growth.
AUD The Aussie weakened sharply in response to the US election result suffering its biggest daily loss since June 24th. On the data front Australia’s Westpac consumer confidence index dropped to 101.3 in November (October: 102.4). The survey showed that households anticipated economic conditions to worsen in 5 years.
CAD Structural weaknesses are weighing heavily on Canada’s export sector but an improved mix of fiscal and monetary policy release some pressure off the central bank to stimulate demand, a senior Bank of Canada official said. The Canadian Dollar trimmed losses after hitting an eight-month low against the US dollar as Republican Donald Trump’s election to the White House raised worries about the outlook for Canada’s trade-intensive economy.