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After 10 days of gains in the foreign exchange market, the US dollar fell slightly. The 10 day streak for the US dollar was the longest streak in over three years. Economists attribute the greenback’s performance to investors’ optimism for the markets thanks to President Elect Donald Trump’s plans for looser market regulations. Investors’ optimism is also carried by anticipated interest rate increases by the Federal Reserve next month.
Despite the slight dip in the US dollar’s value today, the dollar is still up by 3.6% since the announcement of Trump’s presidential victory. The US Dollar Index (DXY) which analyzes the US dollar’s value against other commonly traded currencies (Euro, Japanese Yen, Pound Sterling, Canadian Dollar, Swedish Krona and Swiss Franc) fell .1%, but the dollar is still performing strongly, even with lost momentum.
Some economists are vexed by the optimistic markets, as President Elect Donald Trump’s policies are not set yet. As the foreign exchange markets tends to react poorly to political uncertainty, the dollar’s rally is a surprising outcome to many. Economists warn that the dollar’s rally is unlikely to continue on its streak, but as the last two weeks have reminded us - a prediction is by no means the same as certainty.
Pound and Euro Slightly Up
The Euro is up slightly since Friday, thanks partially to German Chancellor Angela Merkel’s announcement that she intends to run for a fourth term. Merkel’s centrist policies are thought to be a boon to the Eurozone economy. The British pound (GBP) also gained nearly 1% today. Brexit, unfortunately, still continues to negatively affect the pound, which is trading close to an all time low, even with today’s slight gains.
US Dollar and Other Currencies
As the US dollar continues to perform surprisingly well, it will be interesting to see how other currencies, such as the Yen and Canadian dollar react. The Canadian dollar is the only currency in the DXY that managed to have a slight gain on the US dollar during its winning streak. Canada’s dollar continues to be affected by many different forces, including oil markets and American travel during the upcoming Thanksgiving holiday.
Unlike the British pound, which benefited from Trump’s victory due to its long history of teamwork with the United States, Japanese investors shied away from the US dollar following Trump’s win. To these investors, uncertainty is uncertainty. Only time will tell whose bets were right in regards to Donald Trump and the global economy.
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