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Market Report – 14 November 2016

President elect Donald Trump crushed rival Hillary Clinton in dominating style last week. Trump, who will take office on January 20th 2017, then managed to calm markets with a conciliatory speech once he had acquired the 270 electoral votes required for victory, with the expected Dollar sell off yet to start.

Both Theresa May and ECB President Mario Draghi will be making speeches this week. Political uncertainty is continuously sharing the headlines with monetary policies from central banks worldwide and both will continue to be drivers of FX markets for the foreseeable future.

Tomorrow is awash with data releases – RBA minutes, CPI figures from the UK, seasonally adjusted preliminary GDP figures from the Eurozone and retails sales for October from the US.

 

GBP

Sterling recorded a huge 5% gain against the Euro by the end of last week, driven by the new Presidents trade advisor stating that the UK will be at the front of the queue in trade talks.  Dan DiMicco said America would ‘‘absolutely’’ come to an agreement with the UK before the EU, and Brexit happened for the ‘’right reasons’’.

The National Institute of Economic and Social Research GDP estimate of 0.4% compared to the previously revised 0.5%, paints a less gloomy picture than many had expected post Brexit.

 

EUR

Last week’s slide against Sterling was compounded by losses against the Dollar, hitting lows not seen since January 5th this year. The EU have now lost the upper hand in trade negotiations with the UK. The new leader of the world’s largest economy is keen to sign trade deals with the UK, before the EU.

Exasperation with the political and business establishment over a raft of grievances from inequality to immigration will likely shape the votes in Italy, Austria, France, Germany and the Netherlands over the next 12 months. Political risk will be a huge driver, not just of FX markets, but all markets globally.

 

USD

Donald Trump shocked the world last week and won the Presidential race for the White house. Even before Trump had attained the required 270 electoral votes, markets worldwide went into panic, with the S&P 500 and Japanese Nikkei both falling 5%, along with the Mexican Peso falling to record lows. These fears were quickly allayed with a gracious, measured speech in which Trump behaved in a much more Presidential manner – a glimpse of the future?

The Dollar regained some early losses after Trumps victory, trading at no more than a 1.5% loss for the remainder of the week against Sterling.

For more news – please read our Presidential Election blog on our website.

 

Rest of the World

The Reserve Bank of New Zealand cut interest rates to a record low of 1.75% from 2% on Thursday, citing market instability and US political upheavals as the key reasons, with further rate cuts a possibility.

Japan’s economy expanded at a faster-than-expected rate between July and September, due to higher exports. GDP rose at an annualised 2.2% in the three months to September.