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Trump Trades

The story being seen in stocks markets and currency markets in the wake of the US Presidential election result is starting to diverge. Asian currencies have been under pressure, with the Korean won, Indian Rupee and Aussie dollar all weakening overnight. Recall that it was Asia that took an initial bearish view of developments on Wednesday before Europe came in and lifted things. Asia has more to lose from a more protectionist stance from the US administration. The US runs a trade deficit with both, but the Asian deficit is around 5 times that of Europe, hence the nerves. There have also been initial noises regarding NAFTA (the trade agreement between the US, Canada and Mexico), which Trump has threatened to re-negotiate or move. Both currencies (more so the Mexican peso) retain their weaker stance gained in the wake of the results.

Elsewhere, sterling is holding its head above water, cable above 1.25 and EURGBP moving below the 0.87 level, from above 0.90 earlier in the week. The policy backdrop continues to favour the pound, with the BoE not able to cut rates given the deteriorating inflation environment ahead. For today, there are no major data releases, so the continued settling of the dust in the wake of Tuesday’s events will remain the dominant theme.

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