So the USA has just elected their 45th President, a man who has no political or military experience (which is a first) and who is no stranger to controversy. Opinions about the man himself aside, what does this mean for currencies and the US economy as a whole?
Markets this morning reacted badly to the news that Donald Trump was going to be the next President of the United States. Analysts widely predicted that if he was elected, there would be movements on the scale of Brexit or even worse with uncertainty dictating how currencies performed.
After the dust has settled and knee-jerk market reactions have subsided, what has actually happened?
- Between 1:00am (GMT time) & 5:00am GBP soared against USD, moving from $1.2364 up to $1.2542
- From 5:00am to 16:00pm GBP lost ground and sank back to $1.2414 – moving back to barely half a cent up
- EUR / USD rate moving from $1.0999 up to $1.1296 before shrinking to $1.0951
- Biggest loss of the day was the Mexican Peso going from Peso 18.2333 to Peso 20.7317 against the Dollar
- Good news if you are planning a holiday to Mexico with GBP trading at around 25 Pesos to the pound.
What will happen now is anyone’s guess; some people may think that having a businessman instead of a politician in the White House will be better for business, while others are more dubious due to President (Elect) Trump’s lack of experience.
It also doesn’t help matters that the candidates’ campaigns were more about personal attacks on each other than what each would do for the US economy. What will Trump do with banking regulations, the Federal Reserve, Syria, ISIS and free trade agreements is still yet to be known. Each of these issues could have a profound effect on currencies worldwide, so people are going to have to watch things closely.
All in all the initial shocks from the vote have now subsided and losses have almost been completely recovered (apart from the Peso which is still trading at around $20). Something tells me that this is not the end of the turbulence though and we may still see some large movements in the USD exchange rate.
Once Mr Trump’s policies become clearer, we should get a more detailed picture of what lies in store for the US. For those hoping for a significant rise in the GBP / USD exchange rate, you may have to wait a little longer I’m afraid!