– Trump wins and US dollar soars
– Focus shifting to FOMC meeting tomorrow.
– US dollar rallies hard against all the majors.
USDCAD: open 1.3893 overnight range 1.3822-1.3939 close 1.3826, WTI $70.98, Gold, $2720.82
The Canadian dollar is back on the defensive following Donald Trump’s election victory.
The Trump victory is a major loss for free trade. He campaigned on a promise to impose 10% tariffs on all goods imported into the US, with 60–100% tariffs on imports from China. He also promised to slash taxes, and the combination of these two plans is expected to stoke inflation. That’s what bond traders believe, and they boosted the yield on the 10-year Treasury to 4.48% from 4.25%.
The US election overshadowed all else. The release of the Bank of Canada’s Summary of Deliberations barely caused a ripple.
Asian markets followed Wall Street’s gains, with Japan’s Topix advancing 1.94%, while Australia’s ASX 200 rose 0.83%. European markets also moved higher, led by a 1.41% gain in the French CAC 40. S&P 500 futures are up 2.30%.
EURUSD dropped from 1.0938 to 1.0686 in early New York trading. The jump in US Treasury yields and a potential US/EU trade war weighed heavily on the currency. Better-than-expected economic data from Germany and the Eurozone, including a 4.2% month-over-month increase in German factory orders and a modest rise in Service PMI, failed to provide any support.
GBPUSD sank to 1.2841 from 1.3049. Speculation around a 25-basis-point rate cut from the Bank of England, combined with a spike in US Treasury yields and concerns about a US trade conflict, drove the sell-off, while lower-than-expected construction PMI (54.3 vs. forecasted 56) also dampened sentiment.
USDJPY jumped from 151.29 to 154.46, fueled by the market reaction to Trump’s victory and the resulting spike in Treasury yields.
AUDUSD dropped from 0.6645 to 0.6512 due to concerns over Trump’s proposed tariffs on Chinese imports, which could harm China’s economy and, by extension, Australia’s, given their close trade ties. The Reserve Bank of Australia’s mildly hawkish rate outlook from yesterday was largely overlooked amidst these broader market moves.
There is no notable US or Canadian economic data today.