Today is another light economic data day, no tier one datas in London session and one FOMC member speaks, BOC Poloz speaks and prelim UoM consumer sentiment and inflation expectations which were all slightly positive.
As mentioned, the market in general is still very sentiment driven following by the election.
WTI had a solid down day and most equity markets were also down. As mentioned last night, this could very well be profit taking ahead of Friday and consecutive 2 days of risk on sentiment after the election.
There is any single piece of important news today, but let’s take a look at long-term perspective for this week.
EUR - we now have more uncertainty due to the Trump win which fuelled up the global populist movement, with the referendum to come in Italy next month, France election next year and German election next year, all these add on quiet uncertainty about the future of eurozone. The only positive side for EUR is the inflation expectation from USD could also help EUR to finally stop the QE program.
USD - Let’s not talk about Trump, but just looking at the Congress itself to know that the Republican controlled legislations will always be more favourable toward business. USD is actually looking to be strong for months to come. The biggest risk is the civil right movement within the U.S itself, but nothing major enough to effect the international trade - that is unless Trump really exercised the isolationism policy, but even if that happens, we’re not sure USD will be bearish because on the contrary, it might become the best safe heaven currency with future potential for global investors. Yes it is bad for the world, but it is good for America - for now.
CAD - Oil market is really not looking great at this point, the OPEC members’ disagreed views on oil curb, the fundamental conflicts between them, and now the newly elected Trump will cause more hostility toward the middle east. The most important factor is that we have too much oil now, because of the decline global business activities. In essence, as long as the supply is more than demand, then no matter what you artificially try to reduce the supply, it is just very hard to reach a common ground with every producers. Meanwhile, a republican party leader has the opposite view from Canada’s liberal government. Finally, the economic datas form Canada itself were not too bright either. As mentioned, if things keep going, then BOC will have no choice but to keep cutting the rate to sustain the only market that is still booming - real estate. Finally, the high USD will also push oil price down.
JPY - The fundamental view for JPY is actually very simple; you have to keep easing until the inflation picks up, but whenever the world is scared, they’ll buy your currency to further push your inflation down. So really, there is no reason to buy JPY for long-term perspective, but you can always use it for short-term hedge, and you can also use it when heighten event is about to happen.
AUD - AUD has actually been one of the best currency, just look at what happened during the election and after, it was mostly sold & bought not because of the event, but because of the fundamental strength of AUD and sentimental indicator of it. As long as we continue to see China growth, AUD will be very beneficial. And now we’ll have to see how the U.S government going to work with Chinese government in the near future.
NZD - NZD is in a similar spot as AUD but with less bullish strength as they don’t have the exact economic composition as AUD. But NZD is still a good currency to buy when sentiment is on, and not necessary the most sold currency when sentiment is off, so it makes it more safe than AUD when risk sentiment is off.
GBP - GBP continues to be shadowed by the Brexit negation but now ever since the U.S election, things are looking much better for them. If any other Eurozone country leaves in the future, then GBP will be very strong again.
CHF - CHF continues to be non-reactive and still maintain the safe heaven status; but of course the more uncertainty events that are about to happen in Eurozone next month to year, CHF will be very beneficial on that.