The dollar surged to an 11-month high against the most of the currencies on Monday. China's yuan lost another third of a percent. The yuan fell to its weakest since 2010, before the launch of its offshore market. The japanese yen and the euro both sank by about another full percentage point to multi-month lows. The euro fell to $1.0726, its lowest since the beginning of the year. The dollar index rose 1 percent to 100.04, its highest since December last year.
These moves are because of expectations that Trump's administration would both boost spending and put more restrictions on trade. These steps could put an end to the low inflation which has dominated the past decade.
The 10-year Treasury note yield rose to a 10-month high of 2.3 percent in European trade. "Investors are still struggling to cope with all the implications the new U.S. president may have for the world's economy. The interest rate is expected to increase at the Fed's final policy meeting of the year in mid-December”, said Marius Ghisea, President and CEO of MS Capital Consulting.
The USD/JPY currency pair remains bullish, while the improvement in prospects for global growth is set to deliver JPY weakness.
“The U.S. dollar is strong against the major world currencies, touching its highest level in more than two weeks, hovering just below levels last seen in February. The Japanese yen is weak, underperforming with a 1.2% decline from Wednesday’s close. This currency has fallen at levels last seen ahead of the Bank of Japan disappointment from July”, said Marius Ghisea, President and CEO of MS Capital Consulting.
Despite this strong volatility, a rate hike is possible. This would mark the first rate move by the Fed since December last year.
Trump’s victory doesn’t appear to be an obstacle for a rate hike from the Fed.
Donald Trump’s balanced approach in his speech after his victory may suggest that he will allow the Fed to get on with their job. This includes hiking interest rates. The Fed doesn’t need to refrain from hiking interest rates to protect from stock market declines.
Financial markets are reacting to the triumph of Donald Trump over Hillary Clinton in the US presidential election.The US dollar has been recovered ever since Trump looked like a winner. The EUR/USD currency pair has fallen below EMA 200 (1.1047) on the daily chart. At the time of writing, the EUR/USD pair reaches 1.0935.
The NZD/JPY currency pair is sensitive to swings in broad-based market sentiment trends. This pair is responsive to economic news that shapes expectations for Reserve Bank of New Zealand (RBNZ) monetary policy. Next week, Reserve Bank of New Zealand will cut the rate. The rate cut is expected by most of the analysts and priced in.
Investors tend to favor carry trades at times of optimism about global economic performance and they avoid them at times of market stress. According to the 1 hour chart, the NZD/JPY has already risen around 200 pips these days. The price has reached 77.30 and it is above resistance 2.
According to the daily chart, the price is at Fibo 0.61 and it may fall from this level. If the price doesnt fall from this level, it may rise until Fibo 0.76 (79.40).
U.S. stocks opened higher after the Federal Bureau of Investigation (FBI) said its fresh review of Hillary Clinton’s emails won’t lead to charges.
According to the FBI Director James Comey, the bureau had "not changed its conclusions," reached in July, on Clinton's private email server. The news triggered a relief rally globally, with Asian and European indexes gaining, the dollar strengthening and gold selling off.
The Dow Jones Industrial Average quickly rose more than 250 points at the open, with Goldman Sachs contributing the most gains to the tune of 25 points. The S&P 500 advanced more than 1 percent. The Nasdaq composite outperformed, rising 1.5 percent.
According to the most market analysts if Hillary wins, this is good for stocks, if Trump wins, this is bad for stocks. "But, anyone who thinks deeper than this knows that the response is going to be much more nuanced. Ask any owner of a healthcare, financial or defense stock," said Peter Boockvar, chief market analyst at The Lindsey Group in a note.
The MPC voted unanimously to keep the key rate unchanged. It maintains the gilt-purchase target at 435 billion pounds and the corporate-bond purchase target at 10 billion pounds.
The Bank of England is ready to ease monetary policy following the inflation developments. It drops its earlier intention to cut the key rate to a new record low, according to the Bank of England governor, Mark Carney.
BOE officials have ‘limited tolerance’ to above-target Consumer price index. The central bank now sees consumer-price growth rising above its 2 percent goal early next year. It said inflation will be at 2.5 percent in late 2019, the biggest three-year overshoot it’s ever predicted. Mark Carney declined to identify if there is a rate that officials would consider too high.
WTI Crude Oil have dropped to nearly 13.5% in 10 trading days, thanks to the Energy Information Administrator’s largest build in U.S. inventories since 1982.
The domestic crude supplies rose by 14.4 million barrels last week, according to the recent U.S. EIA report.
OPEC reached in September a preliminary agreement in order to cut production, probably by 200,000 to 700,000 barrels per day. The main reason was to pump up prices by removing the unwanted barrels from the market. According to the OPEC, the details of the plan will be completed until its official Nov. 30 meeting.
U.S. equities fell on Tuesday, the first trading day of November, after the release of mixed economic data.
Earnings have been better than expected, but S&P 500 and DJIA fell on Tuesday as recent election news. The Markit manufacturing PMI rose to 53.4, from 51,5 in September. The ISM manufacturing index for October met expectations at 51.9, while construction spending data for September missed consensus.
"Trump's chances of being elected president increased, after FBI director James Comey announced fresh inquiries into Clinton’s potentially illegal use of a private email server”, said Marius Ghisea, president and CEO of MS Capital Consulting.
Investors have been keeping a close eye on economic data, as they assess the likelihood of the Federal Reserve tightening monetary policy. The Fed scheduled a two-day meeting for announcing its latest decision on monetary policy.
Crude oil prices fell and USD declined on profit-taking, as the market lost confidence of an OPEC output cut. The front-month WTI crude contract fell -4.23%, losing for the first time in 7 weeks. The Brent crude contract also plunged -4%. Both benchmarks settled below US$50/bbl for the week.
Precious metals were higher during the week, Gold and Silver accumulating gains of 2.15% and +2.52% respectively. A prolonged period of negative real yields should remain supportive for all precious metals.
OPEC and non-OPEC are gathering, hoping for a deal to be reached. OPEC proposed to achieve a production range of 32.5 – 33M bpd. If exemptions are granted for Iran, Libya, Nigeria (and Iraq?), countries such as Saudi Arabia, Qatar and Russia would have to cut output for achieving the production goal. The countries required to cut more may eventually refuse to collaborate.
The recent economic data showed good news for Eurozone. According to the European Commission in Brussels, an index of executive and consumer sentiment in the region rose to 106.3 from 104.9 last month.
Eurozone economic confidence rose to a 10-month high this month after French growth rebounded and Spain powered ahead. Good news also from Germany. Inflation in Germany rose to its highest level in two years in October, in the latest sign of strength in Europe's largest economy. Prices rose 0.7% Y/Y in October. This has been the fastest rate of increase since October 2014.