Markets React to Trump’s Return to the White House
As President Donald Trump settles back into the Oval Office, investors around the world are trying to make sense of what the next four years will bring. The uncertainty is palpable, with some predicting a chaotic and unpredictable approach driven by Trump himself.
Currency Markets in Flux
Trump’s inauguration speech sent shockwaves through currency markets, with the Mexican peso and Canadian dollar taking a hit. The dollar is trading near its strongest levels against the Canadian currency in almost five years, weighed down by economic weakness and rate cut expectations. Meanwhile, bets on the Chinese yuan are also on shaky ground, with analysts predicting a 5-6% drop by year-end.
Euro and Sterling See Brief Rally
The euro and sterling rallied over 1% on Monday, cheered by Trump’s decision to not immediately impose tariffs. However, Tuesday’s falls in European currencies suggested the relief rally was already over. ING currency strategist Francesco Pesole notes that if Europe is not explicitly mentioned in Trump’s tariff comments, the euro could benefit, but warns that this support may be short-lived.
European Equities See Gains
European equities have gained over 3% so far in January, as investors judge pessimism about economic growth and U.S. tariffs to have gone too far. Big investors are pouring into European stocks, with BofA’s latest global fund manager survey showing the second-largest allocation in 25 years. Amelie Derambure, senior multi-asset manager at Amundi, notes that the group has raised its view on European stocks from negative to neutral on valuation grounds.
Oil and Gas Production in Focus
Trump’s vow to increase U.S. oil and gas production has sent U.S. oil prices tumbling. U.S. crude futures have fallen 4% in the last three trading days, while Brent crude shed just 2%. The United States is already the world’s largest producer of crude oil, but faces competition from the OPEC+ group of major exporters.
Cryptocurrencies Take a Hit
Cryptocurrencies, which soared after Trump’s election win, suffered a setback as his first set of policies made no reference to the asset class. Bitcoin pulled back from a record high, and Trump’s own cryptocurrency launch was met with disappointment. Analysts predict further selling, but note that some of Trump’s staffing picks could be a positive sign for the industry.
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