Australian Dollar
Risk appetite was firmly off yesterday, with the Australian Dollar slumping against almost all of its major peers. Donald Trump won the US election, taking key swing states from Hillary Clinton in a move that shocked the markets. Investors quickly pulled out of the Australian Dollar, despite the supportive news that the Chinese consumer price index had risen from 1.9% to 2.1% as predicted. Even a marginal recovery in market sentiment in the latter half of the session failed to stem ‘Aussie’ losses.
There is a selection of Australian data due for release later, including November’s consumer inflation expectation.
Sterling
AUD/GBP exchange rates collapsed yesterday as the Pound stormed ahead. Sterling received a strong boost as investors rushed to buy UK government bonds, while US Dollar weakness saw markets exploring more profitable and stable cross trades – i.e. those that don’t involve the ‘Greenback’ – favouring the Pound. Unsupportive domestic data was overlooked, with markets unperturbed by another widening of the trade deficits, given the circumstances.
The RICS house price balance for October is the only data on the calendar today, although the markets are still likely to be coping with the US election fallout to be bothered by the scarcity of UK ecostats.
Euro
As one of the most traded currencies, the Euro benefitted yesterday from the market’s aversion to the US Dollar. Demand for cross trades saw the common currency rise bullishly at the beginning of the session. Appetite for bonds also saw the Euro on the rise, with German two and five-year yields edging further into negative territory. Euro gains eased later on as the market volatility began to calm.
There is no notable Eurozone data on the calendar today, but the common currency will still be dominated by the US election, meaning there are still likely to be strong Euro movements throughout the day.
US Dollar
Yesterday was a wild ride for the US Dollar, which remarkably managed to end the session registering bullish gains against the majority of its peers. After the initial crash, the US Dollar was able to trend strongly against higher-risk assets like the Australian Dollar thanks – somewhat ironically – to its ‘safe-haven’ status. Against the more secure assets, the US Dollar registered strong losses, before turning the tables mid-session to notch up those impressive gains. The source of support – again, ironically – came from the very source of market volatility; Trump himself. The Republican’s victory speech was far more ‘Presidential’ than markets had expected, easing market fears.
The lack of data on the US calendar is rather a moot point tomorrow; election fallout is all traders will be interested in.
Canadian Dollar
Like other commodity assets yesterday, the Canadian Dollar slumped. The oil markets weakened markedly in the initial aftermath of Trump’s victory, although crude was clawing its way back towards opening levels by the close of trade. A Trump Presidency bodes particularly ill for Canada due to his aversion to the North America Free Trade Agreement; a deal between Canada, the US and Mexico. Were Trump to end this, Canadian exports to the US could become less profitable, while imports would become more expensive due to the imposition of tariffs by the Canadian government.
The absence of Canadian data will not impact the markets tomorrow; should the election fallout have subsided, the ‘Loonie’ is likely to see movement in response to the latest US crude oil stockpiles figures.
New Zealand Dollar
The New Zealand Dollar was able to advance against its commodity peers yesterday thanks to strong demand for New Zealand government bonds. The ten-year treasury saw a drop in yield of -2.9%, meaning prices were rising fast in response to demand from investors. ‘Kiwi’ securities are desirable as safe-havens due to the comparatively higher interest rates of New Zealand. However, against the safer currencies, the New Zealand Dollar unsurprisingly weakened.
The New Zealand Dollar could see bearish post-election sentiment worsen if the Reserve Bank of New Zealand (RBNZ) cuts interest rates today as forecast.
Data Released
November 10th 07.00 NZD Reserve Bank of New Zealand Rate Decision (NOV 10) 1.75%
November 10th 11.00 AUD Consumer Inflation Expectation (NOV)
November 10th 11.01 GBP RICS House Price Balance (OCT) 18.0%