More currency volatility in wake of Trump win

Currency markets continued to see high levels of fluctuations in the aftermath of Donald Trump’s presidential election win last week.

Although the dust has settled a little bit, the US dollar has still seen volatility, whereas sterling saw fluctuations in both directions, but little movement overall. The euro‘s performance against its major peers was more reactionary, but more significant data from the Eurozone today could turn the tables.

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Sterling awaits direction from Carney

Following on from the monumental US election news last week, data was tepid at best yesterday with sterling not moving too much in either direction on the whole.

The Rightmove house price index was released. On a month-on-month, this was a 1.1% fall, a seasonal drop but the lowest in five years, suggesting the market is resilient in the face of Brexit. However, the focus was on the statistics surrounding the news around first time buyers. Homes for first-time buyers are seeing the biggest rise in asking prices of all sub-sectors of the market, as the affordability crunch bites harder on those struggling to get onto the property ladder.

The UK’s headline inflation data is set for release and expected to grow to 1.1%. This is, in large, due to a sliding currency and raising commodity prices. Following on from this the Treasury Committee Hearing is due, where Bank of England (BoE) Governor Carney and various Monetary Policy Committee (MPC) members are due to testify before the parliamentary committee. Given the focus on inflation within the UK it will interesting to see if the BoE signposts any further potential measures.

Eurozone Data trumped by US election results

Yesterday saw a number of low-impact data releases from the Eurozone. The Finnish Consumer Price Index (CPI) came out as expected, Italian CPI came out mixed, and European-wide industrial production came out better than expected both month-on-month and year-on-year. The highlight of the day came from European Central Bank (ECB) President, Mario Draghi. After a tumultuous past week, the euro faltered slightly against the dollar and remained stable against the pound in a trading day which saw a marked reduction in volatility.

Today will see an uptick in higher-tier data releases. Germany, Italy, Portugal and the Eurozone as a whole will release their Gross Domestic Product (GBP). There will be French and Spanish CPI, as well as a Spanish bond sale, which could hint at the effects of rising inflation forecasts in the US on European inflation expectations.

The German Centre for European Economic Research in Mannheim will also release economic sentiment data for Germany and the EU as a whole.

Despite the completion of the US presidential campaign, the unexpected result means that markets are still adjusting to the reality of a Trump administration. This is still the driving behind upon markets, even for the euro.

Forthcoming Trump presidency tops the agenda

There is plenty of uncertainty post-election, given the fact that Donald Trump has very little political experience and his policies on subjects, such as immigration and trade, are controversial.

It seems equity markets have settled and the dollar has recovered from the initial surprise of Trump being elected as president. It is difficult to judge whether the Federal Reserve will reassess its plans to increase interest rates in December. If the markets remain fairly calm then it is likely that they will do so, which could strengthen the dollar’s position.

Today we have US retail sales for the month of October, which is forecast to rise. We also have CPI data out tomorrow, with inflation expected to rise to 1.6%, the highest point in two-years.

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