Update from North America

USD downfall post-elections, global equities rise

2 min read

The U.S. Dollar took a major dive overnight, weakening to its lowest overall level since the end of September, a decline that continues this morning as markets react to the results of midterm elections and wonder about what may change financially.

A “Blue Wave” materialized, as some polling had predicted, with Democrats taking control of both the House of Representatives and the Senate. Following what seems like a strong rebuke over inflation and the negative effects of armed conflict, it remains unclear how to address a plethora of issues. Nevertheless, it seems equity markets welcome the news and a wave of risk appetite is bringing down both Treasury yields and the Buck.

Additionally, there was a reprieve in oil prices as President Donald Trump explained to reporters he had no immediate plans to order a strike on Iran. Furthermore, when questioned over the favorable election turnout for Democrats, he said he would work with them “if the Democrats want to work with me.” These developments, combined with a lower chance of an interest rate hike at the Fed’s December 9th meeting, are changing the direction for the U.S. Dollar, which has risen 2.0% since the start of September, according to the Bloomberg Dollar Spot Index. To understand why, please see our November Outlook. We shall see whether the October Purchasing Managers’ Index figures, due out at 9:45 AM, counter the USD negativity if they are better than anticipated. Nonfarm payrolls will come out on Friday.

What to Watch This Week…

The complete Economic Calendar can be found here.


EUR

The Euro rose to its strongest level against the Buck since the start of October as G-10 peers ride the rally against the U.S. Dollar. While the American election has caused much of the FX move, the euro was still supported by a few data points coming out basically as expected. PMIs revealed a composite reading of 51.7 vs. 51.9, still demonstrating healthy expansion. Additionally, inflation, as measured by the Consumer Price Index, came in as expected, climbing by 0.4% in October and averaging 4.0% annually. The Producer Price Index will be out tomorrow, while September’s retail sales figures come out on Friday.