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What’s happening: The EUR/USD forex pair moved lower on Monday, reaching its weakest level in more than 6 months.
What happened: Investors remained concerned about possible tariffs levied by the US following Donald Trump’s victory in the Presidential election.
Meanwhile, bitcoin surged past $89,000, climbing more than 30% since the US election on November 5.
Why it matters: Last week, Donald Trump won the race to the White House, beating Kamala Harris. Trump secured a second term as the US President and will be sworn into office in January.
Donald Trump’s policies of tax reductions in the country and levying tariffs on imports from other countries are expected to result in higher inflation in the US. This could limit the Federal Reserve’s pace of monetary policy easing, lending support to the greenback.
The US Federal Reserve cut interest rates by 25 bps on Friday, while signalling a cautious approach to another rate cut in the near term. Trump’s win in the Presidential election has raised questions over whether the Fed will continue lowering rates at a similar pace.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained over 0.5% to 105.54 on Monday. The DXY reached its strongest level since July. Last week, the index added more than 1.5% following the US election results.
The EUR/USD forex pair fell around 0.6% to 1.0656 on Monday, after recording a 0.78% decline on Friday.
The USD/JPY forex pair climbed around 0.7% to 153.72. On November 6, the pair had surged to 154.68, hitting its strongest level since July.
The GBP/USD fell around 0.4% to 1.2868 on Monday.
Bitcoin continued its record-breaking rally on Monday and this morning, taking the total crypto market capitalisation to more than $3 trillion, rising more than 5% in 24 hours. Bitcoin hit a record high of $89,599 this morning on expectations of pro-crypto legislation under Donald Trump’s presidency.
What to watch: Investors will continue monitoring the monetary policy outlook, with expectations of interest rates being held mostly unchanged amid increased tariffs. Data on inflation rate for October will be released on Wednesday, which is expected to significantly impact the US dollar. The annual inflation rate, which eased for a sixth straight month to 2.4% in September, is expected to increase to 2.6% in October.
Retail sales data, due to be released on Friday, will also remain in focus. Analysts expect retail sales in the US to grow by 0.3% in October, following a 0.4% gain in September.
Context: British stocks recorded gains on Monday, joining a broad market rally in European stocks.
Details: UK stocks have been under pressure since last week, as Trump’s victory in the US Presidential election has increased concerns over a potential trade war, which could weigh on economic growth in the Eurozone.
The FTSE 350 mining sector moved lower on Monday, with a decline in most base metals as the recent stimulus package from top consumer China failed to meet market expectations. The precious metals and mining sector also shed more than 5%, with gold prices declining due to strength in the US dollar.
Shares of Croda rose around 5% on Monday, after the company reported 5% sales growth for the third quarter. Kainos Group’s shares surged around 8% after the company said its pre-tax profits rose 1% to £38.2 million in the six months to September 30.
London’s FTSE 100 index gained 0.65% to close at 8,125.19 on Monday, after recording losses for four sessions. The domestically focused FTSE 250 added 1% to settle at 20,723.53.
What to watch: Investors await the release of economic data on employment change, unemployment rate and claimant count change from the UK today. The UK’s unemployment rate, which declined to 4.0% from June to August, is expected to increase to 4.1% in September.
Analysts expect average weekly earnings, including bonuses, to increase 3.9% year-over-year in the three months to September, compared to 3.8% in the previous period. The number of people claiming for jobless benefits, which rose by 27,900 to 1.797 million in September, is expected to increase by 30,500 in October.
Other Markets: US trading indices closed mostly higher on Monday, with the Dow Jones index and S&P 500 up by 0.69% and 0.10%, respectively, and the Nasdaq 100 down by 0.05%.
North Korean soldiers have been deployed to support Russia in Ukraine’s Kursk region. The news sent the RUB/USD pair slightly higher in forex trading this morning.
New Zealand’s electronic card transactions rose by 0.6% to NZ$6,427 million in October, lending support to the NZD/USD forex pair.
Mexico’s industrial output declined by 0.4% year-over-year in September, after a 0.4% contraction in the previous month, sending the MXN/USD pair lower in forex trading this morning.
Brazil recorded a nominal budget deficit of R$53.8 billion in September, compared to a gap of R$99.8 billion in the year-ago month. The figure came in higher than expectations of a deficit of R$53 billion, exerting pressure on the BRL/USD forex pair.
Australia’s Westpac-Melbourne Institute Consumer Sentiment index rose 5.3% to a reading of 94.6 points in November. Although this was the strongest level in over two years, the AUD/USD pair fell in forex trading this morning.
Japan’s machine tool orders, Germany’s consumer price index, current account, ZEW economic sentiment index and ZEW current conditions, Turkey’s current account and retail sales, South Africa’s unemployment rate, unemployed persons and manufacturing production, Eurozone’s ZEW indicator of economic sentiment, India’s industrial production, inflation rate and manufacturing production, Brazil’s retail sales, business confidence and Central Bank of Brazil’s focus market readout, US NFIB small business optimism index, Redbook index, RealClearMarkets/TIPP economic optimism index and consumer inflation expectations for the year, Russia’s balance of trade, Canada’s value of building permits, as well as Argentina’s inflation rate.
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