Trump triumph sets knees knocking
It’s certain – Donald Trump is the new president of the United States of America. The Republican Party also has a majority in the Senate and the House of Representatives. The financial markets responded to the unfolding news with the simplest ‘risk off’ reaction imaginable; Gold and Japanese Yen rose, whilst Treasury yields, equities, the Canadian Dollar and Mexican Peso fell.
The Mexican Peso has maintained its status as the bellwether of sentiment and is moving particularly sharply. Emerging markets continue to be extremely fragile as Trump’s aims of building the infamous “wall”, immigration reform and curtailing the North American Free Trade Agreement appear closer to fruition.
Trump’s acceptance speech surprised as he appeared more “Presidential” and “Establishment” than at any time during his “maverick” campaign, suggesting America has not experienced a “Brexit” moment. However, Bloomberg have estimated that the chances of the Fed increasing interest rates is now 35% less likely to happen in December.
The September UK Industrial Production data was weaker than expected, although the impact was offset by a stronger manufacturing release. NIESR data recorded 0.4% GDP growth in the three months to October compared with a revised 0.5% gain for the previous three-month period. Overall, there was evidence of a slight underlying slowdown in the economy.
Sterling will tend to be undermined by a major deterioration in global risk appetite at the moment, although volatility will inevitably be extremely high in the short term. Sterling could gain some support from expectations that a Trump administration would be much more sympathetic to the UK Brexit case and would offer strong support on trade. The UK focus shifts to the trade balance data due later today, while Bank of England Monetary Policy Committee member Haldane’s speech will be also closely eyed.
Data to watch: 9.30am UK Total Trade Balance, Trade Balance non-EU, Goods Trade Balance. 10am EU Economic Growth Forecasts.