Wednesday, 9 November 2016

President Trump, and the effect on exchange rates

Well, the polls got it wrong again. Amazingly as I woke up this morning and turned on BBC news, I was greeted with the Republican Candidate Donald Trump in the lead, and it's now been confirmed that he will be the next president of the United States. Strange times! The effect on the currency markets have been mixed this morning. Here's how GBP/EUR and GBP/USD moved overnight:



You can see the inverse correlation between the Euro and the Dollar. As the result became more clear, investors dumped the US Dollar in favour of safe haven currencies like the Euro. This caused GBP/USD to rise as the Dollar weakened and became cheaper to buy. The Euro gained strength and pulled GBP/EUR down by around 2 cents, however has since recovered.

Logic would dictate the uncertainty means the Dollar will weaken and that's what we saw initially. Now however the USD is regaining some strength as investors are unsure where to place funds. The USD is a safe haven currency so despite logic dictating weakness on the USD, we've seen that trend reverse this morning.

Other safe havens like JPY and CHF may strengthen, along with commodity based currencies like the AUD, NOK, NZD, CAD etc. I'm actually surprised that the reaction on the currency markets has been so muted. I would have expected much bigger moves in the market this morning, but it's only been a few hours and global markets are still digesting what it all means for the US and global economy.

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This afternoon, we've actually seen the USD strengthen further, and the Euro weaken, which has had the effect of pushing GBP/EUR rates to €1.13 which is the best we've seen buying levels for the Euro in over a month.

It's worth considering fixing a rate for Euros as it's unlikely in my view that these gains will be sustained. We offer various contract types to protect against the rate moving the wrong way. We also provide significantly better rates than your bank or existing broker may offer. If you need to convert currency, get in touch for a free quote today by clicking here or completing the form below.