Markets calmed after the excitement of the Federal US Elections and began to contemplate the economic and foreign policies that will impact markets over the next few years. The uncertainty of the elections has now been removed, which had allowed for equities to rally strongly, while the initial support for the US Dollar, has now receded. The EUR has regained 1.0800, while the GBP has rallied back towards 1.3000. The Bank of England cut rates a further 25 basis points, as the Fed is expected to do, although noted the Labour Governments ‘tax and spend’ budget will add inflationary pressures. The Fed will likely cut rates, but their policy may change, as the Trump administration’s policies become clearer. Trump may decide to completely renovate the Fed structure, and their role, as yet. One thing is for sure, there will be huge change, and not only in America.
The fall in the reserve allowed a strong recovery in commodity currencies, with the NZD regaining the ‘Big Figure’ of 0.6000, while the AUD zoomed back above 0.6650. Chinese trade data was mixed with a big jump in export growth, beating expectations, while imports contracted. This was confirmation of the Australian trade numbers, which saw a sharp fall in both exports and imports. The Trump led Government will change the whole Western world and we have had signs of this overnight, with the German Finance Ministers dismissal. This signals the beginning of the end for the German Government and others in Europe will follow.
