As it became apparent Donald Trump was going to secure those all famous 270 electoral votes to become the next president of the USA, the Euro gained 300 pips over the Dollar before slumping back down to 1.092 due to Trump’s calming acceptance speech and the release of the European Commissions fairly pessimistic forecasts for growth within the single market.
Following a shaky start to the trading day as the global markets adjusted to the shock news of a Trump victory, the Euro benefited from the initial US Dollar weakness reaching monthly highs of 1.12963 over the greenback and weekly highs of 0.9022 over sterling.
However, the single currency was unable to maintain it’s position of strength. This could suggest that the market has already started to account for the political uncertainty that is gradually arising across Europe. This wasn’t helped by the uninspiring economic forecast released by the European Commission (EC) which predicted continued growth in Europe but with downside risks that could potentially dampen investors appetite for the Euro.
Furthermore, Mario Draghi, ECB President, brought up the possibility of an extension of the Quantitative Easing programme which could force long term pressure on the single currency, particularly if the FED commit to their rate hikes in December.
Trump’s election could potentially have quite consequential effect on the strength of the Euro moving forward. His protectionist ideals for international trade may well put a dent in the EU’s trade balance which is often used as a gauge by investors to assess the stability of a currency.
On the other hand, should the Greenback fade under Trump’s hand the single currency could thrive.
The market will most likely be heavily synced to news involving Mr Trump given the control the republicans have over congress. As such future volatility should be expected and planned for.
There are, however, economic and financial implications for Europe. Like Asia, the Eurozone is heavily reliant on exports as a source of growth. These could be affected in two ways: through a more restrictive US trade regime and if a weaker US Dollar drives up the Euro on the foreign exchanges.
The Pound has hit 5-weekly highs against the Euro following a Trump victory, clients may want to benefit from the spike in the market. Call our trading floor on 01494 725 353 or email firstname.lastname@example.org to arrange a free quote.
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