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November 2016

Donald Trump wins Presidential Election

Published: Wednesday 09 November 2016

‚Äč
  • Donald Trump wins Presidential Election
  • Chinese inflation at 6-month high
  • Safe haven trading ensues

You know how some people send sympathy cards when a Coronation street character dies because the poor dears have no concept of the difference between reality and fictional performances. Well I can’t help feeling the opposite effect is happening in America. A reality TV star has run for President with no experience, no detailed policies, no self-awareness, no apparent respect for women, other races or other sexual orientations and no evidence of business morals. Weirdly, at the time of writing, he looks like he is going to win. It is so surreal that even the London clouds are crying.
 
Financial markets have voted with their feet. Shares have slumped across Asian markets and are set to do the same in the European markets and in the UK. Futures trading for the US equities markets shows a similar dive is expected. Those selling US Dollars have headed for the safety of the Japanese Yen, gold, and to a lesser extent the Euro. I am sure the repercussions are not over.
 
The prospects of a wall – either real or legislatively – between the US and Mexico has seen the Mexican Peso dive by 6% and other emerging market currencies are in similar slides; such is the protectionist rhetoric that has emanated from America’s new ‘entertainer in chief’ as one Republican spokeswoman put it this morning.
 
The counting is not over at the time of writing this but Trump has a commanding lead and the Republicans are set to secure control of both legislative houses as well. So the rhetoric has a chance of becoming reality.
 
There is a strong chance that Janet Yellen, the head of the US Federal Reserve will opt to get out after Trump was very critical of her personally and from a policy standpoint and the previously expected December interest rate hike in the US is definitely off the radar.
 
It will also have implications elsewhere; the Bank of England had vaunted the idea of further monetary easing but they may pause for thought on that. The Reserve Bank of New Zealand meets later today in a meeting that was expected to deliver a rate cut from the current 2.0% to 1.75% but traders are less convinced they will do that now. A record trade deficit announced a few weeks ago seemed to have been the last straw that broke the RBNZ’s reticence but the uncertainty that Trump’s success has caused could well see the RBNZ sit on its figurative hands until the dust settles.
 
Lost in this melee was news that Chinese inflation grew at its fastest pace in six months in October. The 2.1% was encouraging and that has strengthened the Yuan to some degree. It will also add support to the Aussie and Kiwi Dollars because China is such an important export market for both countries.
 
The rest of the day is devoid of hard data but will be full of US news and, whilst currency markets appear to be in shock right now, I suspect we will see much more volatility in the day ahead. I have my tin helmet on and I am evacuating to the shelter as I write. Good luck everyone.
 

Quotes

 
Never trust a man when he’s in love, drunk, or running for office.
Shirley Maclaine

Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.
Groucho Marx

We hang the petty thieves and appoint the great ones to public office.
Aesop  (620 – 564 BC)

 

Today's Major Economic Releases
 

 
Market BST Data/Event Previous Expected
GBP 09:30 UK: Goods Trade Balance -12.1b -11.3b
EUR 10:00 EU: Economic Forecasts    
USD 15:30 US: Crude Oil Inventories 14.4m 1.3m
NZD 18:00 Reserve Bank of New Zealand: Official Cash Rate 2.00% 1.75%
NZD 18:00 Reserve Bank of New Zealand: Rate Statement    
NZD 21:00 Reserve Bank of New Zealand Press Conference    

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Daily Currency Analysis by David Johnson

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