Rabu, 09 November 2016

Have you checked how the markets reacted after Donald Trumps victory?

Have you checked how the markets reacted after Donald Trump’s victory?
 
Dear indra saputra,

After months of controversial campaigning from the Democrats and Republicans, the US Elections are finally over and the next president of America has been determined. It was an unprecedented election in many ways, and the financial markets were dominated by the shifts and trends related to the changing momentum for both Clinton and Trump prior to the outcome being confirmed.

As the aftermath of the election settles, we wanted to highlight below three of the many key instruments to keep an extra close eye on over the upcoming days:

  1. Currency Pairs – the Dollar has, as expected, experienced the biggest systematic offload and reload of positions in recent days. Following the victory of President-elect Trump, the Dollar is rapidly falling due to this outcome not being priced in as investors flock to safe-haven currencies like the Yen.
  2. Gold. The markets were in constant flux in the days leading up to the election, and while a lot of investors were driven toward gold’s safe-haven nature, the yellow metal has also shown signs of high volatility. Now that Trump has won, however, we expect traders to continue seeking Gold as shock and uncertainty dominates the markets.
  3. Stock markets – with Trump’s win, a significant reduction of investor risk appetite could further weigh on stocks due to the new President elect’s bias for higher US interest rates.

The Asian equities, specifically Nikkei in Asia and DAX and FTSE 100 in Europe – some of which have already opened – should also be of extreme interest to traders, as these instruments represent a reflector of the current investor appetite towards risk.

The financial markets are extremely volatile and in a current state of total disarray, with the Dollar plunging and Dow Jones futures dropping by 800 points, which was the expected outcome if Donald Trump ended up winning.

How the result has affected the Dollar in the early morning

Since investors shifted towards a “risk off” mode (i.e. favoring less riskier assets), emerging market currencies took a big hit against the Dollar, like the Chinese Yuan (with the USDCNH consolidating below 6.80) and the Mexican Peso hitting record lows, as trading got underway in Asia earlier in the morning.

The Bank of Japan may also find themselves in a tight situation, as the USDJPY pair plummeted from and went below 102 as a result of safe-haven flows into the Japanese Yen.

The fragile state of the cheapening Dollar will be the main focus in the upcoming days and weeks, with safe havens Gold and the Yen becoming more in demand due to investor uncertainty.

To keep updated with more details on how the markets are faring in the aftermath of the US Election, please visit and bookmark our Daily Market Updates Page.

Kind regards,
The FXTM Team
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