iFOREX Daily Analysis : November 09, 2016
iFOREX | Nov 09, 2016 06:22AM ET
The dollar crushed by more than three percent against the yen while the Mexican peso reached record lows early on Wednesday, as Republican Donald Trump surprisingly took the lead in the race for the U.S. presidency. The probability of a Trump win creates the mood for risk-aversion in the markets, sending investors away from risky investments such as equities and into safe-havens such as gold, the Japanese yen and the Swiss franc. The euro and sterling also gained versus the dollar. Trump received the support of some significant states including Florida and Ohio, paving the way to the White House and rattling world markets counting on a win by Democrat Hillary Clinton. The Mexican peso took the biggest hit from this turn of events, weakening by more than 13 percent to an all-time low of 20.75 pesos per dollar. Trump has pledged to renegotiate the North American Free Trade Agreement (NAFTA) with Mexico and Canada, a move that could damage the economies of the export-heavy U.S. neighbors. The Canadian dollar fell to an eight-month low of C$1.3525 per dollar. The Republican candidate has also stoked uncertainty over his stance in foreign policy and immigration, while Clinton is seen by markets as a known entity and likely to ensure political and financial stability. Major volatility is expected in the markets in the aftermath of the U.S. elections which will likely overshadow or disturb the impact economic data at least in the next few days. For today, the European Commission is to publish its two-year economic forecasts for the European Union while later in the week the U.S. will report preliminary data on consumer sentiment and inflation expectations for the University of Michigan.
EUR/USD
The EUR/USD reached fresh nine-week highs at 1.1300 early on Wednesday, following a sharp decline in the dollar, as markets appear rattled by what appears to be a possible Trump victory. However, the dollar appears to recover slightly between 6:00 am to 7 :00 am GMT, following news that Clinton took the lead in Nevada, a key state with 6 electoral votes.Nontheless, Trump is still seen as most likely to win the race for the US presidency putting the markets into risk averse mode. Trump scored a series of surprising wins in battleground states including Florida and Ohio bringing significant volatility which is likely to dominate the markets for the next few days, overshadowing economic indicators. For today, the European Commission is to publish its two-year economic forecasts for the European Union.
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Gold
Gold gained a significant 4 percent on Wednesday reaching its highest level in more than five weeks as investors turn to safe haven assets with Republican Donald Trump leading Democrat Hillary Clinton in the race for the White House. Trump is leading Clinton by 48 Electoral votes as at 7:00 am GMT. This turn of events brings uncertainty and risk aversion into the markets and urges investors to move away from risky assets such as equities and turn to the safe haven of gold. Major volatility is expected in the markets in the aftermath of the U.S. elections which will likely overshadow or disturb the impact economic data at least in the next few days. Later in the week the U.S. will report preliminary data on consumer sentiment and inflation expectations for the University of Michigan.
WTI Oil
Oil prices fell sharply by more that 4 percent, reaching their lowest level since Septemberas early on Wednesday as vote counting showed that Donald Trump is in a significant lead ahead in the race for the U.S. presidency, causing turmoil in the markets.The drop in oil prices came despite a sharp decline in the dollar as uncertainty is considered a threat to growth forecasts which are being downgraded at least over the short-term, weakening demand for commodities like oil. In addition, a report by the American Petroleum Institute yesterday showed crude inventories rising by 4.4 million barrels adding further pressure on prices. Official data from the Energy Information Administration will be released later in the day.
US 500
The main U.S. indices tumbled early on Wednesday as risk aversion appears to dominate investor sentiment, following a significant lead taken by Donald Trump against Hilary Clinton in the race for the presidency. Trump won key battleground states such as Ohio, Florida and North Carolina. The uncertainty and turmoil of a possible Trump victory could raise questions on whether the Fed will go ahead with a rate hike in December. The S&P 500crushed by more than 4 percent by the turn of events and posted a slight recovery between 6:00 am GMT to 7:00 am GMT following news that Clinton took the lead in Nevada, a key state with 6 electoral votes. Nontheless, Trump is still seen as most likely to become the next US president putting the markets into risk averse mode and driving investors out of the equity markets. Major volatility is expected in the markets in the aftermath of the U.S. elections which will likely overshadow or disturb the impact economic data at least in the next few days.
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