It’s now an anniversary calendar week since president elect Donald Trump won the presidential race. The wild gyrations we’ve witnessed on most markets since, as: analysts, market movers and traders took stock of the result and adjusted to the news, has receded as each day has passed.
Markets now appear to be reverting to what we could tentatively describe as “normal behaviour”; in as much as they’re reacting to fundamental news and data, as opposed to rampant speculation on what policy the president elect may (or may not) introduce, once the inaugural process takes place in January, after he finally assumes the role.
Markets have behaved somewhat (understandably) erratically since the (supposed) shock Trump win and these effects have been felt equally in: indices, forex and commodities markets, with dramatic moves being observed in each distinct sector.
European markets have fallen in early trading, with the U.K. FTSE having breached the first level of support within fifteen minutes of the London open, printing a fresh weekly low. Germany’s DAX is moving in tandem with the FTSE, as is France’s CAC.
As is the correlated habit since the Brexit referendum announcement, given that the vast majority of the FTSE 100 quoted companies are based overseas/USA owned, therefore technically valued and trading in dollars, sterling initially rose versus the dollar shortly after the London FTSE market’s fall on open.
However, cable – GDP/USD, is currently (at 9.30 am London time) just short of the first line of resistance, hovering above the daily pivot point. Sterling has risen both in the Asian trading session and early in the London morning session, versus the majority of its major peers. GDP is currently up marginally versus the Aussie, Swissie, the Loonie, Dollar, Yen and Euro.
Looking ahead to the performance of sterling, over the short to medium term, a note of caution may be advisable with regards to sterling and its peers. The UK’s foreign secretary appeared to go off message on Tuesday evening, suggesting that it would be difficult for the UK to remain in the E.U. customs union after Brexit. Negative Brexit news tends to send sterling lower.
Traders should therefore still maintain a weather eye on any Brexit announcements and it’s correlated impact on the value of sterling. In particular traders should note any reference to the timing of Article 50 being invoked. This action, implementing article 50, signifies the UK finally beginning the official process of exiting from the E.U.
Euro has fallen versus the dollar in the London morning session, printing a weekly low of 1.0700. Euro has, however, breached R1 versus yen and as a consequence has reached a four month high versus yen, reaching levels not witnessed since late July.
Yen has fallen marginally versus the majority of its major peers in both the Asian and early London trading session. This moderate fall may (still) be as a consequence of the unexpected rise in Japan’s GDP figures announced earlier in the week. The Bank Of Japan may now cut back on its ambitious quantitative easing/asset swap programme, judging that the monetary policy is finally working, therefore the value of yen will come under less pressure.
WTI oil has experienced a significant recovery over the past two days’ trading sessions, rising from $42 to $46 per barrel. Oil fell from its recent yearly high of circa $52 a barrel, to a level of circa $42. However, with announcements and meetings pending, regarding inventories and the intentions of oil producers to commit to and stick to supply quotas, oil may come under pressure to maintain this recent secular rise. Technically, oil may have simply been oversold and reverting to the recent mean.