Home » Currency Note » Currency Note » US election result weakens dollar

As the US election result filtered through to the markets yesterday, the dollar weakened against sterling and the euro. The Democrats managed to take control of the House and, although Republicans tightened their grip on the Senate, they are now in a position to oppose Trump’s policies and stop anything getting through. Investors believe there will now be gridlock on Capitol Hill, especially given Trump’s criticism of Democrats throughout his tenure.

It was a different story for the stock markets, with the FTSE 100 gaining more than 80 points shortly after trading began. Wall Street opened higher too. Some economists believe that the midterm election results were as good as could be reasonably expected. Ultimately, the potential deadlock means there will be probably be less nasty surprises and political risks. While before Trump could essentially say and do what he wanted (knowing he would almost certainly have the backing of Congress and the Senate), he must now tread more carefully if he is to pass more policies.

On the economic data front, the German construction purchasing managers’ index fell to 49.8 in October from 50.2 the previous month. It is the first contraction in the sector since March, when an extended period of cold weather curtailed activity. Employment growth slowed to a 29-month low, although new orders increased the most in five months. House prices in the UK rose by 1.5% year-on-year in the three months to October which was higher than the 1.2% the markets had been expecting. Still, it is the lowest annual increase in house prices since March 2013.

Today the Federal Reserve will announce its interest rate decision, where it is widely expected that rates will be kept on hold at 2.25% this time around. A hike in December has been expected for some time now, but it will be interesting to see if there are any allusions to future policy, especially indications of further hikes in 2019.

With more uncertainty on the horizon, do consider using a forward contract to lock in your exchange rate. That way, your budget won’t be impacted – no matter where the markets go. Call your Personal Trader on 020 7898 0541 to find out more.

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