Welcome to easyMarkets weekly review where we look back over the results of some of the the previous week’s economic indicators. It gives us the chance to reflect on how much were expectations met or missed and to examine a successful trade you could have made this week.
Event: U.S. Presidential Election
Date: Tuesday 08 November 2016
Markets affected: EUR/USD, XAU/USD, OIL/USD, Equities, MXN/USD
Trending hashtags: #uspresidentialelection, #usd, #gold, #crudeoil, #Trump, #mexicanpeso
The world woke up to a surprise result with Donald Trump taking away the US presidency. The markets had been pricing in a Clinton win so as with any surprises to expectations there were some massive market moves. The carnage began with the Asian equities dropping; Japan’s Nikkei plunged 5.4%, South Korea’s Kospi lost 2.3%, Australia’s S&P/ASX 200 fell 1.9%, the Hang Seng slid 2.2% and China’s Shanghai Composite Index fell to a 10-month low and dropped 0.6%. The FTSE 100 fell by 146.8 points at opening but recovered 68.71 points – a typical rally of what we saw with EU and US equities. US equities took a dive after the announcement, many rebounded with the Dow Jones closing 1.4% up at close of day to 18,589.69. More than $1 trillion was wiped off bond values during the week, this has only happened once before in the last 20 years.
The dollar took a slight dip only to rebound on the expectation of a likely interest rate hike. Trump’s policies favour a higher rate which is bullish for the dollar. The biggest loss of the day was the Mexican peso, which dropped more than 13%, hitting a record low against the USD.
Gold was the winner on the day as the safe-have spiked almost 5% to $1,337.4 an ounce. Crude oil also slipped below $45 after the Trump win and continued under pressure as the focus shifted to the over-supply fears announced the next day by the EIA.
Event: EIA Crude Oil Stocks change
Date: Wednesday 09 November 2016 at 15:30 GMT
Markets affected: OIL/USD
Trending hashtags: #oil, #usd, #eia
Crude oil prices took a 15 cent dip to $4.12 a barrel due to rising supplies. The U.S. Supply data on Wednesday showed a larger than expected growth in oil stockpiles. The EIA announced crude oil inventories up by 2.4 million barrels last week to 485.0 million, which they consider to be at “historically high levels for this time of year”. This beat the expected 1.3 million barrels forecast which helped oil slide once again. Brent oil also fell 0.17% to $46.43 a barrel. Meanwhile prices were not helped by the Paris-based organisation’s, IEA, monthly report showing global supplies rose by 800,000 barrels per day last month to 97.8 barrels. This was due to record output by both OPEC and non-OPEC countries including Russia, Brazil, Canada and Kazakhstan.
Event: RBNZ Interest Rate Decision
Date: Wednesday 09 November 2016 at 20:00 GMT
Markets affected: NZD/USD
Trending hashtags: #nzd, #usd, #rbnz
New Zealand Reserve Bank Governor, Graeme Wheeler, announced a cut in the Official Cash Rate (OCR) by 25 basis points to 1.75%. The cut was based on weak global inflation and political uncertainty leading to more volatile markets. Relative to its international partners, NZ has a high interest rate which is putting upward pressure on its dollar which in turns risks balanced economic growth. The Governor is for a lower exchange rate and has stated that monetary policy will continue to be accommodative. Despite the cut and hawkish statements from the Governor, the commodity currency, the NZD rallied against the USD, but took a fall against the GBP to a low of 1.6727 at one point after the Decision was announced.
Event: US Initial Jobless Claims
Date: Wednesday 10 November 2016 at 13:30 GMT
Markets affected: EUR/USD
Trending hashtags: #usd, #unemployment, #economy, #jobless
With the actual figure of 254,000 so close to the estimated 260,000, US Initial Job Claims held little surprises for the market. Coming in under expectations however was a good sign for the economy and supported USD bulls. With strong jobs data coming in, the Fed is given even more reason for an interest rate hike in December, though with a surprise election result, anything may happen.
The Trade of the Week
Time in: 01:00 GMT
Market: USD/MXN
Investment: $500 with 200:1 leverage
Time out: 04:00 GMT
P&L: $13,500
If you had sold Mexican peso with a $500 margin at the price of $18.30405 and closed the deal, once results made it clear that Trump had won the race to the White House, at 04:00 GMT which saw a 13.5% drop in prices you might have made $13,500. Note this example does not take into account spread.
Sources:
http://www.bloomberg.com/news/articles/2016-11-10/asian-equity-outlook-diverges-after-post-vote-rebound-yen-slump
http://www.reuters.com/article/us-usa-economy-jobless-idUSKBN1351LF
http://www.dawn.com/news/1295488/oil-slips-as-focus-moves-from-trump
