U.S. Session Forex Recap – Nov. 10, 2016

  • U.S. crude oil inventories up 2.4M barrels vs. 1.3M forecast
  • U.S. stock indices recovered 1% after Trump victory
  • RBNZ cut interest rates from 2.00% to 1.75% as expected
  • RBNZ: Decline in exchange rate is needed

What a turnaround for U.S. markets! The Greenback erased its losses from earlier in the day as investors tried to see the silver lining to Trump’s win.

Major Events:

Risk appetite back on? – Contrary to initial reaction of the U.S. dollar and futures to Trump’s victory, investors seemed optimistic that the new president’s plans could benefit businesses and overall economic performance. After all, he did promise sweeping tax cuts, more infrastructure spending, and lower deregulation… so far.

The Dow 30 index rose 256.95 points to 18,589.69 (+1.40%), the S&P 500 index advanced 23.70 points to 2,163.26 (+1.11%), and the Nasdaq was up 57.58 points to 5,251.07 (+1.11%). In particular, traders put money in sectors such as healthcare and financials that could benefit from Trump’s campaign promises. By the looks of it, market participants are giving Trump the benefit of the doubt and might hold out to hear the new administration’s economic agenda first.

Some point to the five priorities of the new administration laid out by Republican Senate majority leader Mitch McConnell as one of the reasons why the markets rebounded. These comprise comprehensive tax reform, increased border security, repealing Obamacare, reviewing environmental regulations, and selecting a Supreme Court nominee. Also, keep in mind that both Congress and the White House are under Republican control, which might not be too bad for U.S. stock markets based on these election tendencies.

Still, others believe that investors are just in denial for now. Either way, markets could keep tossing and turning in the next few days.

RBNZ rate statement – As expected, the RBNZ decided to cut interest rates by 0.25% from 2.00% to 1.75% in an effort to keep the economy supported. With this easing move, RBNZ officials are hopeful that growth would be strong enough to bring inflation near the middle of their target range.

RBNZ Governor Wheeler reiterated that monetary policy would remain accommodative and that a decline in the exchange rate is necessary. He emphasized that the Kiwi’s trading levels are too high to keep growth sustained and is generating negative inflation in the tradeables sector.

Major Market Movers:

USD – The Greenback continued its solid comeback for the rest of the session as U.S. stock markets closed surprisingly higher.

EUR/USD slipped from 1.1091 to 1.0920 (-1.54%), GBP/USD dropped from 1.2450 to a low of 1.2358 before bouncing back to 1.2484 (+0.27%), USD/JPY skyrocketed from 103.15 to a high of 105.89 (+2.65%), and USD/CHF soared from .9741 to .9852 (+1.14%).

JPY – The yen was one of the biggest losers for the session, giving back its intraday gains and more as risk-on vibes returned.

EUR/JPY bounced off 114.40 to a high of 115.82 (+1.24%), GBP/JPY climbed from 128.39 to a high of 131.68 (+2.56%), AUD/JPY is up from 79.35 to a high of 81.13 (+2.28%), and NZD/JPY rallied from 75.52 to a high of 77.91 (+3.16%).

Watch Out For:

  • 12:10 am GMT: RBNZ head Wheeler’s testimony
  • 6:00 am GMT: Japanese preliminary machine tool orders

See also:

London Session Recap

Asian Session Recap

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