Yet again, it’s hard to ignore and not comment on the non FX financial markets this morning. Significantly, the four major US benchmark indexes all simultaneously rose to record highs for the first time since 1999, all spurred by the belief that the incoming US President Trump’s policies will give a boost to economic growth. On the commodity front for example, copper headed for its highest close since July 2015 and oil also reached three week highs – although the oil move is in part to the ongoing OPEC meeting at which it has been speculated that a supply cut agreement will be reached by members. All this has impacted on various currencies too. For example, the Aussie Dollar, a commodity linked currency, rallied along with the Canadian Dollar.
We have written much about the potential impact on monetary policy and subsequently the value of the US Dollar in response to the incumbent US President’s plans. This development has also made markets take a closer look as to what the policy in the Eurozone will look like and how far the paths are likely to diverge between the two. Later today, ECB President Mario Draghi is speaking in front of lawmakers in Strasbourg with markets keeping an eye on any monetary policy details. He is likely to continue with his commitment to providing monetary support and pressurising governments to help out with some fiscal stimulus too, the core focus is likely to be on whether there is amendments or expansion to the current QE program beyond March 2017.
Today marks two weeks since the US election result and looking back on the main FX market moves so far, the overall US Dollar Index is up over 3% since, in particular, for a lot of clients has been the significant shift against the single currency breaking 12 month lows for the EURUSD at 1.0568, representing a 6% plus move in the space of two weeks. The moves for the US Dollar has been as sharp against all its main trading partners with GBPUSD only falling less than 1.5% as sterling also goes through its own post Trump election rally. Although it should also be noted that the US Dollar has put in significant gains against the Japanese Yen, up approximately 9% over the two week period too.