Trump 8217 s influence on global currencies

This morning, for the first time since the US Election, currency markets paused for breath. The sell-off in emerging market currencies eased up and the dollar rally took a break, at least until impressive retail sales data this afternoon put fresh legs on the run.

US Dollar index breaks 100.00

The dollar index has now fully recovered from its morning drop and has managed to break through the psychological level of 100.00 , so will it be able to continue its move higher?

Despite a slower start today, the outlook remains positive for the dollar; Trump’s expected reflationary policies, fiscal stimulus and the possibility of rate hikes coming much more rapidly are all boosting the buck. Furthermore, this week sees a barrage of Fed speakers, including Janet Yellen on Thursday, any hawkish rhetoric here will send out further buying signals.

The dollar index is currently at 100.18, should it break through 100.25 this will open the door for a move higher towards 100.60. On the flip-side, the next support is at 99.20, heading towards 98.39 and eventually 96.84

Swiss Franc rallies on political fears in Europe

Here in Europe Trump has re awakened political fears and these fears are going to remain with us until at least the French elections in April and May next year; if not until the German elections. In France, suddenly the possibility of Marine Le Pen (National Front) being elected is not quite as small as initially assumed. The reawakened fear is presenting itself in the Swiss Franc. The Swiss Franc has been well bid for throughout the run up to the US general election and since Brexit, but unlike other safe-haven currencies such as the yen, which have since pulled back, the swiss franc has remained strong and this reflects the continuing risk sentiment felt in Europe.

Japanese Yen

Another safe-haven currency, the yen, which was considered a hedge against Trump going into the elections is now being aggressively unwound and the USDJPY is currently trading at 108.40, looking to break through 110 as investors continue to abandon the safe-haven currency in favour of the dollar. This is also a story about the dollar, we are seeing dollar strength across the board, there is flight to quality but this is very dollar-centric which would explain why the yen, a traditional go to safe-haven, is actually coming off.

These are still very early days post the election and we still do not know much about what Trump and his administration actually intend to do. For this reason, we could expect that price movements in currencies across the board, but particularly the US dollar, could be very sensitive to news flow or speculation in the near term.